• 4Q20 Core Net Profit in Line With Our and Consensus Expectations
   
• Full-year 2020 profit declined 60% yoy as the business was severely impacted by travel restrictions and a crash in global oil prices. Full-year DPS was lower at 38sen vs. 70sen in 2019 (excluding 15sen special dividend)
   
• We maintain our contrarian Buy rating as we believe PETD fits in as a large-cap recovery proxy on the back of a gradual resumption of air travel as vaccines start to be rolled out. Reiterate Buy with a higher TP of RM22.00

Results in Line

4Q20 revenue plunged 44% yoy, as the COVID outbreak resulted in an overall 25% sales volume decline and a 24% drop in average selling price. Retail sales volume fell by a less drastic 13% yoy. 4Q20 core net profit came in at RM106m (after adding back inventory and PPE write offs, and PPE disposal loss), bringing 2020 core net profit to RM329m (-60% yoy). The results were in line with our/consensus estimates, meeting 95%/102% of forecasts. The pandemic has impacted PETD’s operating cash flow severely, falling by 85% yoy, while net cash fell by 19% yoy to RM2.5bn as of Dec 20.

CMCO Impacted 4Q20

The reimplementation of CMCO by the Malaysian government starting 14 October resulted in 4Q20 revenue declining by 9% qoq, as sales volume witnessed a 7% decline. Core profit halved as margins for both the retail and commercial segments took a hit, further exacerbated by higher repair and maintenance costs at its stations and terminals as well as advertising and promotion activities, following the launch of its new Primax 97 with Pro-Race product.

MCO 2.0 to Hit 1Q21 Results, But in the Price. Reiterate Buy

The upcoming 1Q21 results are likely to be hampered by the re-imposition of MCO2.0 (which started on 13 Jan), although earnings impact is expected to be less severe compared to MCO1.0 (felt in 2Q20 results) due to the less strict SOPs by the government. This is likely to be cushioned by a potential inventory gain, in view of the recent strong run up in global oil prices. We raise our 2021E EPS by 12% to factor in the expected effect of the inventory gain. We raise our DCF-based target price to RM22.00 (from RM21.50), and reiterate our Buy rating. We believe PETD fits in as a large-cap recovery play as vaccines start to be rolled out globally, leading to a gradual resumption in air travel. Key downside risks: 1) delays in publicly available vaccines that will affect the volume recovery, in particular for Jet-A1 fuel, and 2) a sharp decline in global oil prices leading to recognition of lagged inventory losses.

Source: Affin Hwang Research - 22 Feb 2021