Period  3Q13/9M13

Actual vs. Expectations At 73% of our full-year FY13 estimates, the 9M13 core earnings of RM1.09b is within our expectation but it only accounted for 67% of market consensus’.

Dividends  No dividend was declared in 3Q13 as expected.

Key Results Highlights The 3Q13 net profit of RM379.8m contracted by 60% QoQ from RM944.9m in 2Q13 as the preceding quarter’s results included a RM591.6m investment tax allowance granted for the Melaka RGT. On a core basis, the 3Q13 results, in fact, grew by 7% QoQ, thanks largely to the fullquarter contribution from the Melaka RGT with operating profit of RM92.3m (from RM2.8m preoperating loss) in 3Q13.

 On the other hand, the associate income turned profitable in 3Q13 with share of income of RM14.5m from share of loss of RM0.9m in 2Q13 after reverting its previous unrealised forex loss to unrealised forex gain incurred by the Kimanis Power and Kimanis O&M. In addition, the interest expense jumped to RM20.7m from RM6.5m on forex loss of its finance lease liability. We understand that this will be ongoing to reflect the forex movement in the future.

 YoY, 3Q13 net profit leapt 20% from RM317.7m in 3Q12 while the YTD 9M13 core net income rose 8% to RM1.09b from RM1.01b previously, due mainly to the Melaka RGT’s contribution. Note that in 2Q12, PETGAS reported a RM100m.disposal gain from the listing of GASMSIA (MP; TP: RM3.41).

Outlook  2H13 is expected to be stronger as the Melaka RGT is operational. Meanwhile, PETGAS has yet to announce the Re-gas fee. We understand that GASMSIA and TENAGA (OP; TP: RM10.45) are still paying the old rates to Petronas for the new gas supply from the Melaka RGT.

Changes To Forecasts No changes to our FY13-FY14 forecasts.

Rating Downgrade to UNDERPERFORM from MARKET PERFORM

Valuation  TP is maintained at RM20.77/SOP share.

 The share price has risen 18% in the past three months to reach its all-time-high of RM24.52 yesterday, which the valuation is stressed, in our view. While we still like its earnings profile, we believe it is time to take profit.

Risks  The delay in the commencement of Kimanis IPP and Lahad Datu RGT.

Source: Kenanga