• Overview. 3Q19 core earnings recovered swiftly by 40.5% qoq to RM245m due to inventory gain from rising MOPS price aided by higher sales volume (+4% qoq). On yoy basis, earnings fell 13.5% due to higher depreciation charges, marketing and maintenance costs.

• Key highlights. Total sales volume grew 6% yoy to an est. 4,000m litres underpinned by growth in retail segment, higher Jet A1 fuel demand from existing customers, and pick up in offshore activities.

• Against estimates: Inline. 9M19 core profit of RM691m (-11.1% yoy) was broadly inline with our and consensus’ forecasts at 71%/73% respectively.

• Dividend. A 3rd interim DPS of 16 sen was declared similar to 3Q18. This brings YTD DPS to 45 sen (9M18: 45 sen) implying payout of 64%.

• Outlook. We expect the sales volume growth momentum to sustain in view of recovery in offshore activities aided by new retail station openings.

• Our call. Maintain BUY on PDB with a higher DCF-derived TP of RM27.00 (from RM26.00) as we roll-over valuation to FY20, which implies 27x FY20E P/E. We believe the stock makes a compelling investment case owing to its defensive attributes.

Source: BIMB Securities Research - 25 Nov 2019