1Q19 core earnings grew 2.4% to RM74m underpinned by higher sales volume and tariff while lower effective tax rate of 26% (1Q18: 27%) also aided growth. At the EBITDA level, profits grew 6% yoy to RM74m; a better reflection of its performance, in our view. However, gains were offset by higher depreciation charge and interest expense; the former could be due to recognition of completed pipes from the Kinta Valley project ahead of corresponding revenue kicking in.
On qoq basis, core earnings fell 1.3% which is in tandem with weaker sales volume attributed to seasonality factors, in our view. We also note that effective tax rate in 4Q18 was lower at 20% (1Q19: 26%).
Overall, 1Q19 core earnings were broadly inline with estimates at 23% but trailed consensus at 21%. We expect some earnings respite in 2H19 with full completion of the Kinta Valley project. GMB’s daily gas allocation for 2019 was raised to 552 mmscf/day at end 2018.
Despite moderate growth expected, we remain advocates of GMB; BUY with RM3.30 DCF-derived TP. We believe the stock remains one of the best proxies for exposure to Malaysia’s Industrials.
Source: BIMB Securities Research - 16 May 2019
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