• 4Q20 Results Exceeded Our and Consensus Estimates
• 2020 gas sales volume was marginally lower by 0.6% yoy despite the MCO. GMB declared a second interim DPS, bringing ytd dividend to 9.65sen (final to be announced in Apr).
• Raised FY21-22E EPS by 6-8% to factor in better shipper margins. Lifted target price to RM3.18 (from RM3.05). Maintain Buy for its attractive yields of c.6%

2020 Gas Sales Volume Fell 0.6% Yoy

2020 revenue declined 3% yoy to RM6.7bn affected marginally by the lower gas sales volume and lower average gas price, despite securing an additional 51 industrial customers. The rubber glove sector remained the biggest contributor to revenue at 36%, followed by consumer products at 17%, oleo-chemical at 13% and glass at 9%. 2020 core profit of RM220m (+31% yoy) was a positive surprise against our and consensus estimates, achieving 111%/113% of respective forecasts due to the better-than-expected shipper function margin and recognition of revenue cap adjustment in 4Q20.

IBR Adjustment Drove 4Q20 Profit Qoq

Sequentially, 4Q20 revenue rose 6% as gas sales volume grew 3.4%. Core net profit rose 51% qoq, on the back of a 1.3ppts improvement in the EBITDA margin driven by the IBR adjustment. Overall profit was also lifted by a higher interest income attributable to the adjustment for the previous quarter.

2020 Dividend Is Marginally Higher Than That in 2019

GMB declared a second interim DPS of 5.4sen bringing the ytd DPS to 9.65sen; the final dividend is usually announced in April. 2019 total DPS payout was 14.1sen (comprising of 9.6sen interim, 4.5sen final). We have forecasted a full-year payout of 14.7sen in 2020E, and assumed a 90% payout across 2011-2023E, translating to dividend yields of 5.9%–6.6%.

Reiterate Buy on This Yield Play

We raise our 2021-22E EPS by 6-8% largely to factor in better shipper margins, and introduce our 2023 forecasts. Our DDM-based 12-month target price is raised to RM3.18 (from RM3.05). Backed by decent EPS growth with a dividend yield of 5.9%, GMB makes an attractive yield play. We maintain our BUY rating. Key downside risks include another full-on MCO lockdown which will have an adverse impact on the natural gas volume, or lower-than-expected margins.

Source: Affin Hwang Research - 1 Mar 2021