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Author: savemalaysia   |   Latest post: Mon, 26 Oct 2020, 6:03 PM


Better half for Petronas Dagangan beckons?

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KUALA LUMPUR: Petronas Dagangan Bhd (PDB) is expected to record better sales volume in the second half (2H) of the year following a much positive sales volume in July and August, said MIDF Research.

PDB's overall sales volume plunged 39 per cent year-on-year (YoY) and four per cent YoY in Q2 and Q1 respectively, due to the implementation of the Movement Control Order (MCO) from March to June.

"We estimate sales volume to be at par or slightly below the sales volume seen in 2H 2019 given that the government had introduced the recovery MCO from June 9 which allowed 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," it said in a note today.

MIDF Research expects PDB's earnings in 2H to also be cushioned by better average selling prices (ASPs).

This is because Mean of Platts Singapore (MoPS) prices have been showing upward trend following the increase in oil price in recent weeks, resulting in improved ASPs for fuels across the board when compared against Q2 2020.

In Q2 2020, Brent crude oil price averaged at US$33.39 per barrel versus US$50.8 per barrel in Q1 and US$68.47 per barrel in Q2 2019.

As a result, ASP for RON95 in Q2 was recorded at RM1.36 per litre versus RM1.98 per in Q1 litre and RM2.08 per litre in Q2 2019.

"While we opine that the crude oil price will continue to trade between US$40-US$45 per barrel — 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," it said.

MIDF Research has maintained PDB's financial year 2020-2021 earnings, after taking into consideration all the factors that could impact its earnings going forward and its recent revision on August 26.

The firm has also maintained its "neutral" call on PDB with an unchanged target price of RM19.31.

The recommendation is reflective of the current operating environment for fuel retailers with gradual recovery in demand is expected to take place until the year end.

"While we are positive on the potential recovery of both sales volume and ASPs in the coming quarters but we remain wary of the potential adverse impact from the ongoing Covid-19 developments which might stall earnings recovery.

"That said, we continue to view PDB positively given its ongoing effort in mitigating the impact from lower selling prices and sales volume via increasing pump productivity, aggressive marketing and product promotions and creating brand stickiness via Setel mobile application."

MIDF Research said PDB's fundamentals remained intact and dividend yield was decent at three per cent financial year 2021 forecast.




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