• Maintain HOLD (TP: RM16.52). Petronas Gas Berhad (PetGas) 3MFY24 net profit of RM472mn was in line with our and consensus expectations at 25% respectively. 1QFY24 earnings widened 5.4% YoY on the back of lower fuel gas (-28% YoY) and internal gas consumption expenses. A first interim DPS of 16sen/share was declared. We expect earnings to stay resilient in coming quarters on the back of normalisation in gas price and continuation of the ICPT surcharge of 17 sen/kWh for 2Q24. Maintain a HOLD call on PetGas with DCF derived TP of RM16.52 (WACC: 8.0%, TG: 0.3%).

• Key highlights. During the quarter, PetGas guided that it achieved a commendable power export capacity to the grid via NEDA, which led to a GP portion of c.RM4mn. Of note, the group participated in NEDA since August 2021. The contribution from joint ventures and associate, on the other hand, was weaker (-40% YoY, -74% QoQ) dragged by provision in aging receivable.

• Earnings Revision. No changes to our forecasts.

• Outlook. We expect PetGas’s earnings to remain stable in upcoming quarters owing to (i) normalisation in gas price that will reduce fuel gas cost across all segments, and (ii) continuation of the ICPT surcharge of 17 sen/kWh for 2Q24. As of now, both Pengerang LNG storage expansion project and new gas compressor in Jeram are progressing well with targeted COD in mid-2025 and 2026 respectively. The group also guided that it secured final investment decision (FID) and in discussion with the government for an approximate 100MW of new power plant in Labuan.

Source: BIMB Securities Research - 30 May 2024