• Overview. Gas Malaysia 4Q21 net profit rose 11.1% qoq to RM69m driven by (i) higher sales volume (3Q21:47.3m MMBtu, 4Q21:53.9m MMBtu) due to gradual easing of MCO and ii) recognition of revenue cap adjustment, which arises due to the shortfall in the regulated gas sales volume. On yoy basis, earnings were largely flat as there was also recognition of revenue cap adjustment in 4Q20.
   
• Key highlights. GMB recorded higher sales price in 4Q21 at RM36.42/MMBtu (4Q20: RM33.65, 3Q21: RM30.03).

• Against estimates: Inline. FY21 core profit grew by 17% yoy to RM250m mainly due to higher amount of revenue cap adjustment which contributed to higher EBITDA margin of 7.4% (FY20: 5.7%). This was in line with both our and consensus’ forecast at 98.4% and 94.7% respectively.

• Dividend. A 6.0 sen DPS was declared, bringing a total DPS for FY21 of 16.2 sen (vs FY20: 15.1 sen), translating to DY of 6%.

• Outlook. Management expects to ramp up its RP1 capex spending to RM315m in 2022 (2021: RM118m), this includes Kedah Rubber City, Chuping Valley (PPP with Perlis state), Kedah Science & Technology Park, Padang Meha, Serendah and Proton City which will boost its regulated earnings in coming years. In the gas shipping segment, the company expects margin to be relatively stable as it has already secured the contract renewal from its legacy customers.

• Our call. Maintain BUY on Gas Malaysia with TP of RM3.37 which implies 16.7x FY22F PE. We favour Gas Malaysia due to i) ability to sustain recurring income from pipelines asset amidst market liberalization ii) expansion of NGDS network ii) steady distribution tariff, iv) stable shipping margin and v) generous dividend payout ratio of c.85% or yield of c.6.4%.

Source: BIMB Securities Research - 17 Feb 2022