PGB’s 3QFY21 core PATMI of RM588.7m (+34.2% QoQ; +9.8% YoY) brought 9MFY21’s sum to RM1.6bn, within HLIB’s expectation (73.3%) and consensus (78.9%). Declared 3rd interim dividend of 18 sen/share. PGB’s earnings remained stable despite the ongoing Covid-19 pandemic and nationwide lockdown, while management continued to look for investment opportunities for long term earnings growth. We maintain our BUY recommendation on PGB with unchanged SOP-derived TP of RM19.00, supported by: (i) healthy balance sheet with net cash position (RM1.66/share); (ii) sustainable earnings and strong cash flow; and (iii) dividend yield of 5.2% (with potential upside from special-D).

Within expectation. PGB’s reported 3QFY21 core PATMI at RM588.7m (+34.2% QoQ; +9.8% YoY), bringing 9MFY21’s sum to RM1.6bn (+1.8% YoY). We deem the results within HLIB’s expectation (73.3%) and consensus (78.9%). For 9MFY21, the group recognised net EIs of -RM46.6m (after accounting for MI), mainly attributed to unrealized forex translation loss during 1QFY21.

Dividend. Declared 3rd interim dividend of 18 sen/share (ex-date: 6 Dec 2021). YTD dividend payout would be 50 sen/share.

QoQ. Core earnings improved by +34.2% to RM588.7m mainly due to lower overall internal gas consumptions and adjustment to internal gas consumptions calculation for Regasification segment during the quarter.

YoY. Core earnings improved by +9.8% due to combination of (i) adjustment to internal gas consumptions calculation for Regasification segment during the quarter; and (ii) higher utilities margin on lower fuel gas costs and lower depreciation expenses.

YTD. Core earnings was relatively flattish +1.8% YoY to RM1.6bn as the improved group operation margins from lower depreciations and internal gas consumption costs, offset by lower associates/JV contributions.

Outlook. Management guided sustained PGB’s earnings despite the ongoing Covid-19 pandemic, being protected under existing long-term contract with Petronas (Gas Processing) and related parties (Utilities) and RAB structure (Gas Transportation and Regasification). As the country transition into Phase 4 of the National Recovery Plan, the group does not expect any downside impact to its businesses. Management is still in discussion with Energy Commission with regards to RP2 2023-2025.

Growth. Management updated that both RM100m de-bottlenecking project and RM540m pipeline extension project remains on track for completion by July 2022 and March 2023 respectively. Its 65% owned Pengerang LNG 2 (RGTP) has issued non - binding Expression of Interest (EOI) for the provision of a new proposed LNG storage tank 3 in Pengerang for LNG storage and reload activities as management is expecting increasing LNG transhipment activities within the region. The project is targeted to complete earliest by 4QFY25, which will further enhance the group’s non-regulated earnings.

Forecast. Unchanged.

Maintain BUY, TP: RM19.00. We maintain BUY on PGB with unchanged TP: RM19.00, based on SOP, supported by: (i) healthy balance sheet with net cash position (RM1.66/share); (ii) sustainable earnings and strong cash flow; and (iii) dividend yield of 5.2% (with potential upside from special dividend, as the group continues to improve its capital structure).

Source: Hong Leong Investment Bank Research - 23 Nov 2021