• PTG’s 6M20 core net profit exceeded expectations at 58% of our and 57% of consensus full year estimates. The better performance was driven majorly by higher-than-expected JV profits.
• PTG declared a 50sen one-off special dividend, on top the 16sen interim dividend, bringing 6M20 DPS to 88sen, already matching FY19 DPS.
• We raise our 2020-22 EPS by 4-6% to factor in better JV performance and lower interest expense. Maintain our Hold rating with a slightly higher target price of RM17.30.

Operations in Line

2Q20 core net profit came in at RM527m, bringing PTG’s 6M20 profit to RM1.05bn (+8% yoy). This was ahead of our and consensus expectations, accounting for 58% and 57% of estimates, with the surprise coming from higher-than-expected JV profits, which increased 26% yoy. PTG’s 2Q20 revenue was flattish at +1% yoy with higher regasification revenue offsetting lower utilities revenue due to lower electricity sales during the MCO. Meanwhile, operating profit increased 5% yoy mainly driven by lower depreciation and maintenance costs incurred for its gas processing plant and higher Pengerang LNG regasification terminal contribution. This was partly negated by weakness at its transportation and utilities business.

Special Dividend Took Us by Surprise

On top of the second interim dividend of 16sen (similar to 1Q20), PTG declared a 50sen special dividend (higher than the 10sen declared in 2019). This brings 6M20 DPS to 82sen, already matching full year 2019 of 82sen. Awaiting management dividend guidance in its post result briefing today, PTG could potentially pay out in excess of 100% of its 2020E EPS assuming it maintains its 16sen payout in the upcoming 3Q and 4Q. We have raised our DPS assumption to 114sen, implying a 119% payout ratio in 2020, translating to 7% dividend yield.

Maintain Hold

We reiterate our Hold rating and with a slightly higher target price of RM17.30 (from RM17.00) after factoring in our earnings revisions, implying a 18x FY21E PER. Current PE valuation seems fair, trading near its long-term 15-year average. Key risks: Any unforeseen operational disruption of existing assets and faster recovery or further deterioration in economic environment likely affecting its volumes

Source: Affin Hwang Research - 21 Aug 2020