1Q21 core PATAMI of RM184m (+68.4% QoQ, +1355% YoY) came in within ours and consensus’ expectations, accounting for 30% and 29% of forecasts respectively as we anticipate a weak 2Q21 due to MCO3.0. Nevertheless, we expect MOPS trend to remain robust due to higher and more stable oil prices. Maintain HOLD at unchanged TP of RM18.55 based on 30x PE on FY21 EPS. We believe that the stock is fairly valued at this juncture.

Within expectations. 1Q21 core PATAMI of RM184m (+68.4% QoQ, +1355% YoY) was within ours and consensus’ expectations, accounting for 30% and 29% of forecasts respectively as we expect 2Q21 to be a weak quarter due to the onslaught of MCO3.0. 1Q21 core PATAMI was arrived at after adjusting for -RM6.9m EI’s mainly comprising of (i) net gain on disposal of PPE: -RM2.4m, (ii) write back of impairment loss on receivables: -RM2.2m and (iii) unrealised forex gain: -RM1.6m.

Dividend. DPS of 14 sen/share was declared (Ex-Date: 9 June 2021; SPLY: 5 sen/share).

QoQ: Core profit rose by 68.4% due to higher group ASP of 19%, partially mitigated by a decline in sales volume of -3%.

YoY: Coming off a low base, the significantly better core profit of RM184m (+1355%) was attributable to (i) a more favourable MOPS prices trend despite lower sales volume from both its retail and commercial segments and (ii) lower operating expenditure fro m lower advertising and promotion activities purchased and professional service.

Outlook. While we expect a favourable MOPS price trend going forward due to the stability in crude oil prices, we opine that its sales volumes could drop further as a result of the implementation of MCO3.0 and escalating Covid-19 cases of late. However, we believe that the ramp up in vaccination rates nationwide should be able to bring us back to some form of normalcy towards year end. We expect 2Q21 to be its weakest quarter of the year before seeing some material recovery in the middle of 3Q21.

Forecast. No changes as we expect 2Q21’s results to offset its good performance in 1Q21.

Maintain HOLD, TP: RM18.55 based on 30x FY21EPS (-0.2SD from 5 year mean). We maintain our HOLD rating at an unchanged TP of RM18.55 based on 30x FY21EPS (-0.2SD from 5 year mean) as we believe that there are still a lot of fluidity regarding the Covid-19 pandemic in Malaysia, and its resulting MCO. Hence, we believe that the stock is fairly valued at this juncture.

Source: Hong Leong Investment Bank Research - 27 May 2021