PGB’s 4QFY21 core PATMI of RM473.4m (-19.6% QoQ; +2.8% YoY) brought FY21’s sum to RM2.1bn (+2.4% YoY), within HLIB’s expectation (96.3%) and consensus (100.7%). Declared 4th interim dividend of 22 sen/share and special dividend of 10 sen/share. We expect PGB’s earnings to sustain in 2022 despite the ongoing Covid-19 pandemic, while management continued to explore for investment opportunities for long term earnings growth. Maintain BUY recommendation on PGB with unchanged SOP-derived TP of RM19.00, supported by: (i) healthy balance sheet with net cash position ( 89.3 sen/share); (ii) sustainable earnings and strong cash flow; and (iii) dividend yield of 5.0% (with potential upside from special-D).

Within expectation. PGB’s reported 4QFY21 core PATMI at RM473.4m (-19.6% QoQ; +2.8% YoY), brought FY21’s sum to RM2.1bn (+2.4% YoY). We deem the results within HLIB’s expectation (96.3%) and consensus (100.7%). For FY21, the group recognised net EIs of -RM61.2m (after accounting for MI), mainly attributed to unrealized forex translation loss during 1QFY21 and deferred tax adjustments (-RM30m) in 4QFY21 in relation to Cukai Makmur FY22.

Dividend. Declared 4th interim dividend of 22 sen/share and special dividend of 10 sen/share (ex-date: 9 Mar 2022). YTD dividend payout would be 82 sen/share.

QoQ. Core earnings declined by -19.6% to RM473.4m mainly due to higher overall internal gas consumptions and +RM70m adjustment for year-to-date internal gas consumptions calculation for Regasification segment recognised in previous quarter.

YoY. Core earnings improved by +2.8% on lower administrative cost and net interest expenses.

YTD. Core earnings were relatively flattish +2.4% YoY to RM2.1bn as the higher earnings from Utilities and Regasification segments were partially offset by the lower margins of Gas Processing and Gas Transportation segments.

Outlook. Management guided PGB’s earnings to continue sustain into FY22, 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). Management expected details of RP2 (2023- 2025) to be finalised with Energy Commission by year end.

Growth. Management updated that RM100m de-bottlenecking project is expected to complete by mid-2022 while RM540m pipeline extension project remains on track for completion by early-2023. The proposed new LNG storage tank 3 in Pengerang (for LNG storage and reload activities) is expected to reach financial decision by end 2022 and complete earliest by 4QFY25. The construction of gas processing plant in Kerteh would be completed by mid-2023. Capex allocation in FY22 is around RM1.3bn, and expected to taper down in FY23.

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 (89.3sen/share); (ii) sustainable earnings and strong cash flow; and (iii) dividend yield of 5.0% (with potential upside from special dividend, as the group continues to improve its capital structure).

Source: Hong Leong Investment Bank Research - 23 Feb 2022