Journey to Wealth
Gas Malaysia - 3Q12 results in line
Period 3Q12
Actual vs. Expectations The 9M12 results came in within our expectation but slightly above the street's forecast with the net profit of RM117.4m accounting for 75% of our FY12 full-year estimate and 79% that of the market consensus.
Dividends No dividend was declared as expected.
Key Results Highlights The 3Q12 net profit rose 3% QoQ to RM42.0m as revenue grew 3% in the quarter to RM542.4m. The slight improvement in the earnings was mainly due to an improved sales volume and a lower taxation charge (effective tax rate of 21% vs. 22% previously).
On a YoY comparison, the 3Q12 net income surged 38% from RM30.5m in 3Q11, which was attributable to the higher sales volume of 3% YoY and also due to the lower effective tax rate of 21% vs. 25% previously.
Nonetheless, the 9M12 net earnings contracted by 29% YoY to RM117.4m from RM166.0m in 9M11 despite revenue rising 7% to RM1.57b from RM1.47b previously. The sharp decline was chiefly due to a tariff revision, effective 1 Jun 2011, which saw the profit spread cut by almost half to RM2.02/mmbtu from RM3.95/mmbtu previously.
Outlook The new 40MMScdf gas supply from the Melaka RGT in Jan 2013 will be the earnings catalyst for the company, which will bring a c.10% increase in the gas supply.
The subsequent 30MMScdf and 40MMScdf additional gas supplies from the same Melaka RGT in Jan 2014 and Jan 2015 respectively will ensure a consistent earnings growth post-2013.
Changes To Forecasts No changes to our FY12E-FY14E forecasts.
Rating MAINTAIN OUTPERFORM
Valuation We continue to like GASMSIA for its earnings quality and generous dividend payout, which offer both growth and income attractions. We are maintaining our OUTPERFORM call on the stock with a price target of RM2.94/DCF share.
Risks Should the government decide to reduce the gas tariff, this will lead to a lower margin spread and in turn, negatively impact the company's profitability as was seen previously in FY09.
Source: Kenanga
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