PGB’s 4QFY22 core PATMI of RM415.6m (-18.1% QoQ; -12.2% YoY) and FY22 of RM1.8bn (-10.2% YoY) were within HLIB’s expectation (100.5%) and consensus (104.7%). We estimated the impact of the Prosperity Tax at c.RM120m in FY22 (deemed as an EI). Declared a fourth interim dividend of 22 sen/share (YTD: 72 sen/share, below our estimation of 85 sen/share). We expect the increasing fuel gas prices to continue affect PGB’s earnings in the short term along with the lower effective revenue for Gas Transportation and Regasification segments under RP2. Nevertheless, the downside will be partially negated by the approved surcharge 20 sen/kWh for electricity tariffs in 1HFY23. Maintain HOLD with an unchanged SOP-derived TP of RM17.85.

Within expectations. PGB reported 4QFY22 core PATMI at RM415.6m (-18.1% QoQ; -12.2% YoY) and FY22 at RM1.8bn (-10.2% YoY). We have excluded an estimated RM120m negative impact from the Prosperity Tax at 33%, RM67.7m unrealized forex loss in FY22 and RM16.7 net impairments/writeoffs. We deem the results within HLIB’s expectation (100.5%) and consensus (104.7%).

Dividend. Declared a fourth interim dividend of 22 sen/share (ex-date: 3 Mar 2023). Total dividend YTD was 72 sen/share (below our expectation of 85 sen/share).

QoQ/YoY. Despite higher group revenue, core earnings dropped by -18.1% QoQ and -12.2% YoY to RM415.6m, dragged by increased operating costs, mainly from accelerated maintenance costs, higher gas consumptions and higher fuel gas prices (based on MRP by Petronas) across all segments except for Regasification. Similarly, contributions from JV and associate also dropped QoQ and YoY.

YTD. Core earnings declined by -10.2% to RM1.8bn, dragged by weaker performance across all segments. Gas Processing segment was affected by higher maintenance costs. Gas Transportation, Regasification and Utilities segments were affected by higher gas consumptions and gas fuel price.

Outlook. Demand for gas and utilities are expected to continue improve in tandem with the economic recovery. Gas Processing earnings will largely sustain into subsequent quarters, being protected under existing long-term contract with Petronas. Under RP2 2023-2025, earnings from Gas Transportation and Regasification segments are expected to drop marginally due to lower tariff structures. Utilities segment is expected to benefit from the recent approved surcharge of 20 sen/kWh tariff for non-domestic users in 1H2023.

Forecast. Unchanged.

Maintain HOLD, TP: RM17.85. We maintain HOLD on PGB with an unchanged TP of RM17.85 based on SOP. While we expect PGB to continue maintain its dividend payout (given its high current net cash position of 84.1 sen/share), we expect PGB’s earnings to remain affected by the increasing fuel gas costs in the near term as well as the lower effective revenue for Gas Transportation and Regasification segments under RP2. Nevertheless, the downside will be partially offset by the recent approved surcharge of 20 sen/kWh for electricity tariffs in 1HFY23.

Source: Hong Leong Investment Bank Research - 17 Feb 2023