• Overview. PetDag 4Q21 core profit rose 53% yoy and 15% qoq to RM137m driven mainly by recovery in sales volume following the reopening of more economic sectors. EBITDA margin, however, was compressed to 3.6% (4Q20: 5%, 3Q21: 5.1%) potentially as a result of lag loss from declining MOPS price during the quarter.

• Key highlights. 4Q21 sales volume grew by 23% qoq and 16% yoy to 3.4bn litres. This is c.10% below pre-Covid level (Chart 2). On annual basis, it declined by 2% to 11.9 bn litres (FY20: 12.2bn litres) but still largely within our estimate of 12.5bn litres. 4Q21 Mesra income also improved by 21% qoq and 12% yoy to RM78m

• Against estimates: Below. FY21 core profit jumped 87% yoy to RM530m mainly due to improved margin from favourable oil price movement which had more than offset the decline in sales volume. Overall, this is below both our and consensus’ forecast at 67% and 93% respectively. The deviation against ours was due to our aggressive EBITDA margin assumption of 6.1% (FY21: 4.9%).

• Dividend. A 4 th interim DPS of 26 sen was declared which is higher than 4Q20 DPS of 17 sen. This brings FY21 DPS to 70sen (FY20: 38sen) which implies payout ratio of 130%.

• Outlook. We expect the company’s sales volume to continue to recover as the Government plans to fully open the border potentially in 2Q22. We also think that the weak margin in 4Q21 to normalise in coming quarters as oil price movement turns favourable towards the company.

• Our call. Maintain our BUY recommendation on PetDag with unchanged DCF-derived TP of RM22.90. This implies 27x FY22F P/E (Table 4). We still see it as one of the leading proxies to Malaysia’s post-Covid recovery theme, driven by oil demand recovery.

Source: BIMB Securities Research - 23 Feb 2022