• Overview. PetDag 4Q20 core profit fell by 58% qoq to RM89m (3Q20: RM213m) as the implementation of conditional movement control order (CMCO) stalled further recovery in sales volume. Gross profits declined by 17% qoq to RM630m (2Q20: RM765m) while opex rose to RM605m (2Q20: RM564m). Higher opex was due to higher marketing costs for the launching of premium RON97 Pro-race fuel product as well as higher maintenance activities.

• Key highlights. Sales volume declined by 7% qoq to 2.9bn litres (3Q20: 3.1bn litres) due to weaker gasoline demand amidst restricted interstate and interdistricts movement. Demand from aviation stagnated due to continuation of border closure. Other income declined by 6% qoq and 10% yoy to RM70m.

• Against estimates: Below. FY20 core profit declined by 66% yoy to RM283m as sales volume dropped by 23% to 12.2bn litres (FY19: 15.6bn litres). This lagged both our and consensus estimate at 82% and 64% respectively. Deviation against our forecast was mainly stemmed from lower than expected interest income.

• Dividend. A 4th interim DPS of 17 sen was declared which is lower than 4Q19 DPS of 40 sen. This brings FY20 DPS to 38 sen (FY19: 85 sen) which implies payout ratio of 133% (FY19: 103%)

• Outlook. We expect demand to remain subdued in 1H21 due to reinstatement of MCO, but stronger recovery is likely in 2H21 supported by the vaccine roll-out.

• Our call. Maintain HOLD recommendation on PetDag with unchanged DCF-derived TP of RM18.20. This implies 25x FY21F P/E (Table 4). Despite the prospect of demand recovery in near-term, we see limited upside in the stock which makes it as a less attractive target for investors to ride on post-pandemic recovery theme.

Source: BIMB Securities Research - 22 Feb 2021