• 1Q19 core profit grew 29% yoy and more than 100% qoq to RM263m mainly due to inventory lag gain. Overall, 3MFY19 earnings came largely within ours’ and consensus forecast at 27% and 25% respectively.

• Sales volume grew 3% yoy to est. 3,764m litres led by 6% growth in retail sales volume.

• A higher 1st interim DPS of 15 sen (1Q18: 13 sen) was declared, implying a 57% payout ratio.

• Maintain HOLD with unchanged RM27.25 TP. We see lack of catalyst to sustain earnings growth thus limiting the upside to share price.

Boosted by inventory gain

1Q19 core earnings grew 29% yoy to RM263m mainly due to higher margin resulting from inventory lag gain. The core earnings were arrived after we exclude one-off gain from disposal of PPE worth RM18.7m. Overall, it came largely within ours’ and consensus forecast at 27% and 25% respectively.

Recovering from weak 4Q18

On qoq basis, earnings recovered swiftly as MOPS price recovered from sharp decline in 4Q18. This boosted earnings by more than 100%, as inventory lag gain expanded EBITDA margin by 460 bps to 6.3% (4Q18: 1.7%).

Encouraging sales volume

Total sales volume grew by 3% estimated at 3,764m litres (1Q18: 3,655m litres) underpinned by encouraging sales volume in the retail segment. Retail volume grew 6% to 1,643m litres (1Q18: 1,550m litres) driven by its continuous marketing campaign and higher number of station in operation. Meanwhile, volume for the commercial segment rose marginally by 1% to 1,715m litres (1Q18: 1,698m litres) led by higher Jet A1 sales volume following higher demand from existing and new contracts secured.

Declared higher 1st interim dividend of 15 sen

A 1st interim DPS of 15 sen was declared (1Q18: 13 sen) and implies 57% dividend payout ratio.

Maintain HOLD with unchanged TP RM27.25

We maintain our HOLD recommendation on PDB with an unchanged DCF-derived TP of RM27.25. This is based on a 7.5% WACC and long term terminal growth rate of 1.5% which implies 26.5x FY19E PE. We see limited catalyst to sustain the earnings growth, hence capping upside to share price.

Source: BIMB Securities Research - 29 May 2019