• Overview. Gas Malaysia Berhad (GMB) revenue soared by 4.9% QoQ and 34.8% YoY in 3Q22 to RM1.87bn mainly steered by higher average natural gas selling price. The price hike offset its lower natural gas volume sold during the current quarter however (3Q22: c.48.1mn GJ, 2Q22: c.51.7mn GJ) stemming from the pullback from rubber gloves sector. Concurrently, core earnings rose by 53.4% YoY to RM96mn owing to higher gross profit and finance income, lower finance cost and higher contribution from the Group’s joint venture companies. This propelled 3Q22 EBITDA margin higher or a jump of 8.7% YoY (3Q21: 7.8%).

• Against estimates: Above. 9MFY22 core profit of RM294mn was slightly above our forecast, accounting 82%, however in line with consensus at 79% respectively.

• Dividends. No dividend declared as GMB usually pays its dividend every half of the year.

• Earnings revision. We revised our FY22F/FY23F/FY24F earnings by 7%/6%/5% to RM388mn/RM410mn/RM414mn (see Table 3) after incorporating a revision in our shipping margin.

• Outlook. We expect earnings to remain elevated for at least two incoming quarters in line with higher Malaysian Reference Price (4 months lag). Nonetheless, this may be mitigated by a static or slight decline in gas volume contribution from the rubber gloves sector (3Q22:25%, 2Q22:30%). As of 30 September, the Group have added 46 new and 6 expansion customers while terminating 25 customers.

• Our call. Maintain a BUY call on Gas Malaysia with a higher TP of RM3.75 (from RM3.71) which implies 12.4x FY22F P/E. We like Gas Malaysia due to i) its ability to sustain recurring income from pipelines asset amidst market liberalization, and ii) steady dividend.

Source: BIMB Securities Research - 21 Nov 2022