• Overview. PetDag 2Q20 core profit declined 98% yoy to RM4m due to weak oil demand amidst Covid-19 pandemic. Revenue declined by 61.5% yoy to RM2.9bn as sales volume declined by 39% yoy while ASP also declined by 37%. On qoq basis, it recovered from loss in 1Q20 driven by inventory gains arising from upward trend in MOPS price.

• Key highlights. Total sales volume declined to estimated 2.5bn litres. Other income from Kedai Mesra also declined by 10% yoy and 24% qoq to RM64m.

• Against estimates: Inline. 1HFY20 core EBITDA of RM216m (-72% yoy) lagged our estimate at 26%. We deem this as within our forecast on expectation of gradual recovery in sales volume in 2HFY20.

• Dividend. A 2nd interim DPS of 5 sen was declared bringing total 1H20 DPS to 10 sen. This is lower than 1H19 DPS of 29 sen.

• Outlook. Following easing of MCO and business resumption, we expect a swift recovery in sales volume moving forward with the exception of demand for jet fuel which may take longer time. Historically, aviation contributed to c.20% of PetDag’s total sales volume. At this juncture, we retain our 2020 sales volume forecast of 12.5bn litres, implying 20% decline yoy (2019: 15.6bn litres)

• Our call. Maintain SELL on PDB with unchanged DCF-derived TP of RM18.20, which implies 52x FY20E P/E before easing to 25x FY21F P/E (Table 4). We believe this is fair given its earnings risk from lower sales volume resulting in lower dividend yield.

Source: BIMB Securities Research - 26 Aug 2020