- We maintain our HOLD recommendation on Petronas Gas (PGas) with an unchanged fair value of RM24.40/share, based on our sum-of-parts valuation. This implies an FY15F PE of 27x.
- We leave our FY15F-17F earnings unchanged as PGas’ 1QFY15 net profit of RM449.9mil is in line with expectations, accounting for 25% of both our and consensus estimates.
- The group declared a first interim dividend of 14 sen/share (1QFY14: nil), translating to a payout of 62%.
- PGas registered a net profit growth of 7.6% for 1QFY15. This is mainly due to higher reservation charge as a result of the implementation of new Gas Transportation Agreements (GTA) and Gas Processing Agreement (GPA) effective 1 April 2014. This also resulted in Petronas booking higher transportation capacity under the new GTA.
- On a QoQ basis, net profit had declined by 21.2%, as 4QFY14 earnings included the recognition of one-off investment tax allowance (ITA) – following the commissioning of all three blocks of the Kimanis Power Plant (KPP) – on the JV level.
- The group’s next phase of growth will be contributed by the group’s second LNG regasification plant in Pengerang that was recently announced and targeted to be operational by 4QFY17. As the Pengerang RGTP’s capacity is similar to the existing Malacca regasification facility’s 530MMscfd, we expect the Pengerang RGTP to contribute approximately RM300mil per annum to the group’s EBIT upon commencement of operations.
- PGas will also be involved in the development of an air separation unit in a JV with Linde, which is expected to be used for the production of oxygen and nitrogen. A final investment decision (FID) is expected to be reached by 3QFY15 and targeted to be completed by 4QFY18.
- The stock currently trades at an FY15F PE of 25x, while dividend yield remains decent at 2%-3%.
Source: AmeSecurities Research - 13 May 2015
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