• Maintain HOLD (TP: RM3.53). Gas Malaysia Berhad (GMB) 12MFY23 core profit of RM383mn made up within our estimate and consensus at 101% and 105% respectively. In 4QFY23, the headline profit rose to RM104mn (compared to RM86mn in 3QFY23), mainly due to the surge in gross profit attributed from reversal of provision and higher sales volume (+4% QoQ). A second interim dividend of 8.42 sen declared. We expect earnings to remain flattish moving forward on the back of normalisation in gas price and flattish demand from its main gas offtaker; rubber glove sector. Reiterate a HOLD call on Gas Malaysia with a higher DCF-derived TP of RM3.53 as we roll our valuation to FY2024.

• Key highlights. In terms of segmental breakdown in FY2023, the rubber glove player remained as the main sector that squeezed the gas volume sold in its Gas Malaysia Energy and Services (GMES) division. Notably, GMES volume has declined by 10% YoY.

• Earnings Revision. No changes to our forecast.

• Outlook. We anticipate that GMB’s earnings will remain relatively flat in the upcoming quarters, aligning with the rationalisation in the Malaysian Reference Price (MRP) and subdued demand from its major customer, a rubber gloves player. We expect a slightly lower net margin in FY24F, considering that the FY23 net margin was largely influenced by the peak of MRP in 1Q23, reaching the highest level in 10 years at RM58.04/MMBtu. Additionally, management has indicated that it plans to increase CAPEX spending in 2024, ranging from RM275mn to RM300mn, as some pipeline extension projects scheduled for 2023 were delayed and are set to resume this year. It's worth noting that this CAPEX is allocated for the construction of 150km to 170km of pipelines.

Source: BIMB Securities Research - 21 Feb 2024