Results

• In-line : 4Q17 core net profit came in at RM275.9m, bringing FY17 core net profit to RM1095.5m, accounting for 97.0% of HLIB and 99.3% of consensus.

Deviations

• None.

Dividends

• Declared an interim dividend of 27 sen/share and special dividend of 22 sen/share, bringing FY17 total DPS to 97sen.

Highlights

• YoY : Core net profit increased by 10.2% due to improvement in product selling volume and higher gasoline margins driven by favourable movement in MOPS pricing.

• QoQ: Earnings dropped 16.5% due to lower product margin in both Retail and Commercial segments and higher operating expenditure.

• FY17: PATAMI registered 16.2% growth mainly underpinned by improved margins of gasoline products for the retail segment and stronger margins from the aviation and diesel products in the commercial segment.

• Volume growth outlook for the retail segment (especially gasoline sales) remains muted as demand for car fuel could be dragged down by recent commencement of MRT facility which encourages public commuting.

• Commercial segment volume is expected to improve in 2018 given that the group now focuses on higher margin products with higher value add.

Forecasts

• Maintain.

Risks

• Further weakness in consumer sentiment.

• Volatility of MOPS pricing which might affect group’s product gross margins.

Rating

HOLD ↔

• Positive impact of the improvement in product margin has been reflected and normalization of margin in 2018 and muted outlook for gasoline volume has made its long term prospects less appealing.

Valuation

• Maintain HOLD with unchanged TP of RM24.64 pegged to 24x FY18 PER.

Source: Hong Leong Investment Bank Research - 27 Feb 2018