MIDF Sector Research

Author: sectoranalyst   |   Latest post: Thu, 22 Oct 2020, 11:26 AM


Petronas Dagangan - Earnings Set to Recover in 2HFY20

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  • PetDag’s 2HFY20 sales volume expected to improve in-line with easing of Covid19 measures
  • ASPs to improve in 2HFY20 owing to better MOPS price following stable crude oil price movement
  • Efficient cost and inventory management to continue supporting earnings
  • Encouraging growth in sales of MESRA stores and usage of SETEL application, a positive sign
  • Maintain NEUTRAL with unchanged TP of RM19.31 per share

Sales volume recovery anticipated in 2HFY20. We attended a conference call organised by Petronas Dagangan Berhad’s (PetDag) yesterday and came away feeling reassured of the company’s future earnings trajectory. Moving past the recent dip in revenue and earnings due to the implementation of the movement control order (MCO), we are anticipating better sales volume to be recorded in the second half of the year following a much positive sales volume recorded in July and August 2020. Recall that, 2QFY20 overall sales volume plunged by - 39.0%yoy and -4.0%yoy in 2QFY20 and 1QFY20 respectively due to the implementation of MCO from March through 9th June 2020. We estimate sales volume to be at par or slightly below the sales volume seen in 2HFY19 given that the Government had introduced the recovery movement control order (RMCO) from 9th June 2020 onwards which allows interstate traveling and businesses to fully resume operations. Coupled with the increase in domestic travel as a result of overseas travel restrictions and months of pent-up movement restrictions; we opine that this new development will bode well in returning some of the volumes back to the market.

Better average selling prices to help lift earnings. Along with the anticipated improvement in sales volume, we believe that PetDag’s earnings in the second half of FY20 will also be cushioned by better average selling prices (ASPs). This is as MOPS prices have been showing encouraging upward trend movement following the increase in oil price in the recent weeks resulting in improved ASPs for fuels across the board when compared against 2QFY20. Refer to Figure 1 below. Recall that, the brent crude oil price has averaged at USD33.39pb in the 2QFY20 vs USD50.8pb in 1QFY20 and USD68.47pb in 2QFY19. As a result, ASP for RON95 in 2QFY20 was recorded at RM1.36per litre vs RM1.98per in 1QFY20 litre and RM2.08 per litre in 2QFY19. While we opine that the crude oil price will continue to trade between USD40- 45pb – barring any unforeseen circumstances, for the remainder of the year; we are positive on the stability of the crude oil price shown in the recent weeks which allows for better visibility in terms of purchasing and inventory management for the fuel retailers.

Source: MIDF Research - 27 Aug 2020

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