4Q20 core PATAMI of RM109m (-47.6% QoQ, -16.5% YoY) brought FY20 core PATAMI to RM335m (-67.4% YoY). This is below ours but in-line with consensus expectations, accounting for 92% and 104% of forecasts respectively due to lower than expected retail and commercial sales volume. As a result of this, we lower our FY21 earnings forecasts by 13.1%. Maintain HOLD but at a lower TP of RM18.50 based on 30x PE (from 26x) on FY21 EPS. Our higher P/E multiple is premised upon our expectations on sequential quarterly improvements post MCO despite our earnings cut for FY21.

Below expectations. 4Q20 core PATAMI of RM109m (-47.6% QoQ, -16.5% YoY) and FY20 core PATAMI of RM335m (-67.4% YoY) was below ours but in-line with consensus expectations, accounting for 92% and 104% of forecasts respectively. The results were below expectations as the impact from CMCO on retail and commercial volumes were weaker than what we have previously anticipated. FY20 core PATAMI was arrived at after adjusting for RM59.0m EI’s of inventory write down, impairment of trade receivable and other forex gains/losses.

Dividend. DPS of 17 sen/share was declared (Ex-Date: 4 March 2021), bringing 12M20 DPS to 38 sen/share (SPLY: 85 sen/share).

QoQ: Lower sales volume of 7% from the implementation of CMCO coupled with a 2% decline in group ASP resulted in core earnings declining by 47.6%.

YoY: Lower sales volumes (-25%) and MOPS derived ASP (-18%) in tandem with the CMCO, has led to retail sales declining by 13%. Commercial sales were also significantly lower as PBT declined by 63% mainly due lower jet fuel sales from travel restrictions implemented and lower demand of diesel from the upstream sector.

YTD. Lower demand, lower sales volumes (Retail: -13%, Commercial: -33%) and ASP (Retail:-16%. Commercial: -24%) resulted in total sales volume falling by 23% and group ASP falling by 20%. This was due to travel restrictions implemented to circumvent the Covid-19 pandemic. Consequently, core PATAMI fell by 59%.

Outlook. We expect lower commercial sales volumes and ASP to continue until the end of FY21 before rebounding strongly in FY22. However, we believe that retail sales is poised for a strong rebound in 2H21 as we expect travel restrictions to be less stringent going forward due to vaccine rollouts and lower cases stemming from current measures implemented to curb the proliferation of the Covid-19 virus. However, we expect 1Q21 earnings to be significantly weaker QoQ due to MCO2.0 but we opine that we are beginning to see the light at the end of the tunnel due to the lower trend of cases of late and the timeline of vaccination rollouts.

Forecast. We lower our FY21 forecast by 13.1% to factor in the impact from MCO2.0 but maintain our FY22 forecast as we believe that there should be some sense of normalcy in FY22 and with this, we anticipate a strong recovery in FY22.

Maintain HOLD, TP: RM18.50 ba sed on 30x FY21EPS (-0.2SD from 5 year mean). We maintain our HOLD rating at TP of RM18.50 from 18.55 previously, upgrading our P/E multiple from 26x (-0.5SD from 5 year mean) to 30x (-0.2SD from 5 year mean) as we believe that the sequential quarterly improvements are expected to lift its P/E higher despite our earnings cut for FY21.

Source: Hong Leong Investment Bank Research - 1 Mar 2021