4Q21 core PATAMI of RM160.6m (+35% QoQ, +47% YoY) and FY21 core PATAMI of RM546m (+63% YoY) came in well within ours/consensus’ expectations, accounting for 97%/96% of full year forecast. We believe that PetDag has turned the corner and we expect sequential earnings recovery in future quarters with the momentum of economic reopening and the expected ease in international travel in FY22. Maintain BUY with an unchanged TP of RM22.05 based on 25x FY22 EPS, which is in line with its 3-year historical mean forward P/E multiple.

Within expectations. PetDag’s reported 4Q21 core PATAMI of RM160.6m (+35% QoQ, +47% YoY), which brought FY21’s sum to RM546m (+63% YoY). This came in within ours/consensus’ expectations, accounting for 97%/96% of full year forecast. FY21 core PATAMI was predominantly adjusted for: (i) RM1.7m net loss on disposal of PPE; (ii) RM21m impairment loss on both receivables and PPE; and (iii) RM4.1m reversal of write down on inventories.

Dividend. Fourth and final interim dividend of 26 sen/share (ex-date: 9 March 2022, payment: 24 March 2022) was declared in 4Q21, bringing FY21 total DPS to 70 sen/share.

QoQ: Core profit improved by 35% due to: (i) higher sales volume (+23%) and average product selling prices (+10%) respectively. We believe that the boost in both the ASPs and sales volume was attributed to the higher average crude oil prices in 4Q21 and the healthier demand from the economic reopening post lifting of the Phase 1 restrictions in 3Q21 (since mid-Aug onwards).

YoY: Core profit spiked by 47% mainly due to: (i) a 15% increase in sales volume and a 22% increase in average product selling prices for its retail segment; and (ii) an increase of 18% in sales volume and 66% increase in average product selling prices for its commercial segment. We believe that the boost in both the ASPs and sales volume was attributed to similar reasons mentioned above.

YTD. Coming off a low base due to the major decline of crude oil prices in FY20, FY21 core profit improved by 63% to RM546m (from RM335m in FY20), mainly due to an 23% increase in product prices. However, we note that this was marginally offset by a decrease of 2% in sales volume.

Outlook. We opine that PetDag is turning the corner and we think that the group should see even better quarters ahead with the momentum of economic reopening and the expected ease in international travel in FY22, which would further increase the group’s sales volume for both its retail and commercial divisions.

Forecast. Unchanged.

Maintain BUY, TP of RM22.05. We maintain our BUY recommendation on PetDag, with an unchanged TP of RM22.05/share. Our TP is based on a P/E of 25x on FY22 EPS, which is in line with its 3-year historical mean forward P/E multiple.

Source: Hong Leong Investment Bank Research - 23 Feb 2022