Bimb Research Highlights

Petronas Gas Berhad - Boosters for RGTSU Utilisation Rate

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Publish date: Mon, 23 Oct 2023, 04:18 PM
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Bimb Research Highlights
  • PetGas anticipates that utilization rate for its Regasification Terminal Sg Udang (RGTSU) to be increased to 65-70% beginning 2026 onwards driven by higher demand from switching of coal-fired power plants to gas.
  • Besides that, the government’s plan to make Malaysia as a regional gas hub via Trans-Asean Gas Pipeline project could also boost RGTSU utilisation rate.
  • Nonetheless, we are neutral with this as the facility is already fully subscribed by shippers which are required to pay the service regardless of its utilisation rate.
  • Maintain a HOLD call with a TP of RM15.98. Our valuation is derived based on DCF valuation with a WACC of 7.9% and a long-term growth of 0.3%.

Ready to Meet Incoming Demand

According to a report from TheEdge, PetGas forecasted a higher utilization rate for its Regasification Terminal Sg Udang (RGTSU) from 2026 onwards. To recap, RGTSU utilization rate averaged between 10 and 15% in the past three years, and the segment is expected to improve to between 65 and 70% from 2026. This is on the back of the gradual increase in demand by utility providers amidst the drive to incorporate a cleaner fuel; switching from coal to gas in power generation segment. According to the company, it currently only handles one LNG shipment per month but it could cater to one shipment per week in a full capacity scenario.

Expanding Gas Supply Network

Additionally, PetGas is also currently negotiating at expanding its gas supply network through the Trans-Asean Gas Grid project (TAGP), underpinned from the government aims to make Malaysia as regional natural gas hub. To note, there were four entry points into the PGU pipeline network – Kertih, Pengerang, Sungai Udang and Songkhla, Thailand. Management guided that gas demand in Thailand could easily be twice as large as Peninsular Malaysia. Hence, we believe that the realization of TAGP could also be the driver to ramp up RGTSU utilization rate. Nonetheless, we understand that a higher utilization rate for RTGSU would have a neutral impact to the group as the facility is fully subscribed by gas shippers. Note that its revenue recognition is based on reserved capacity booking of the facility regardless of utilisation rate i.e. take-or-pay clause imposed to the users of the facility.

Maintain HOLD with TP of RM15.98

Reiterate a HOLD call with a TP of RM15.98. Our valuation is derived based on DCF valuation with a WACC of 7.9% and a longterm growth of 0.3%.

Source: BIMB Securities Research - 23 Oct 2023

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