• Maintain HOLD (TP: RM3.40). Gas Malaysia Berhad (GMB) 9MFY23 core profit of RM279mn is deemed within our estimate and consensus at 73.8% and 75.9% respectively. In 3QFY23, the headline profit narrowed to RM86mn (compared to RM98mn in 2QFY23), primarily due to a lower average natural gas selling price, partially offset by higher volume of natural gas sold (+4% QoQ) and higher share of result from the Group’s joint venture companies. No dividend declared. We expect earnings to remain flattish moving forward on the back of normalisation in gas price and softening demand from its main gas offtaker; rubber glove sector. Reiterate a HOLD call on Gas Malaysia with an unchanged DCF-derived TP of RM3.40.

• Key highlights. In 3QFY23, both revenue and net profit declined by 2.6% YoY and 9.9% YoY respectively, driven by lower volume of natural gas sold (3Q23:37.2mn GJ vs 3Q22:39.5mn GJ), higher operating and administrative expenses though mitigated by higher average natural gas selling price during the quarter.

• Earnings Revision. No changes to our forecast.

• Outlook. We anticipate that GMB’s earnings to remain flattish in upcoming quarters in line with declining Malaysian Reference Price (MRP) and muted demand from its major offtaker – rubber gloves player. We understood elevated prices bode well for the Group as it can boost a higher spread of margin since it is derived from a fixed percentage of gas selling price.

Source: BIMB Securities Research - 29 Nov 2023