• Overview. PetDag 1Q22 core profit declined 34% yoy and 16% qoq to RM126m mainly due to higher product cost for jet fuel. This led the commercial segment to swing into net loss of RM41m – its only second quarterly loss since 2014 (the first quarterly loss was recorded in 2Q20 which saw the oil price plunge due to halt in the international travel). Retail segment, however, remain sturdy with net profit growth of 55% yoy ad 16% yoy to RM213m.

• Key highlights. 1Q22 sales volume grew 20% yoy but it was largely flattish qoq at 3.4bn litres. This is also c.10% below pre-Covid level (Chart 1). Management has also introduced a new business segment named as “Convenience” in the financial report which mainly comprised of its non-fuel business such as Kedai Mesra.

• Against estimates: Below. 1QFY22 core profit came below both our and consensus’ forecast at 15% and 17.4% respectively. Nonetheless, we make no changes in our forecast at this juncture pending further details from analyst briefing later today.

• Dividend. A 1 st interim DPS of 5sen was declared which is lower than 1Q21 DPS of 14 sen and implies payout ratio of 38%.

• Outlook. We expect the company’s sales volume to continue to recover as the country has fully opened the border in 2Q22. This is evident from the increase in the air ticket booking as well as the heavier traffic congestion which was reported in the local media recently.

• Our call. We downgrade PetDag to HOLD (from BUY) with unchanged DCF-derived TP of RM22.90. This implies 27x FY22F P/E (Table 3). We think its underperforming 1Q22 result and smaller dividend payment could weigh on its share price in near term.

Source: BIMB Securities Research - 27 May 2022