Period  4Q13/FY13

Actual vs. Expectations The FY13 results were within our estimates with core earning of RM1.49b which was only 1% off our forecast. However, the core earnings were 12% below market consensus which we believe include the non-recurring RM591.6m investment tax allowance granted for the Melaka RGT.

Dividends  A 40 sen NDPS was declared in 4Q13, bringing FY13 NDPS to 55 sen which is higher than our estimate of 53 sen. In FY12, it paid a total NDPS of 50 sen

Key Results Highlights 4Q13 net profit rose 4% QoQ to RM393.7m mainly due to lower tax expense resulting from change in deferred tax estimates with corporate tax rate lower at 24% from 25% previously. In fact, top-line only inched up by 1%, led by gas processing (+2%) and utilities (+1%) business segments.

 YoY, 4Q13 core earnings jumped 33% while revenue rose 13% over the year. Likewise, FY13 core earnings expanded 14% on the back of a 9% hike in revenue. This was mainly attributable to the inception of Melaka RGT at end-June 2013, which contributed RM163.5m operating profit in FY13. Gas Transportation was the only segment reporting earnings growth due to higher capacity booked by Petronas whereas the Gas Processing and Utilities units posted decline in earnings due to lower production for butane and ethane (for the former) as well as lower offtake by customers in the Utilities segment.

Outlook  FY14 earnings will reach a new high mainly to be propelled by the full year contribution from the Melaka RGT and the commencement of Kimanis IPP. The Lahad Datu RGT will be the next earnings catalyst when it comes onstream in 2015.

Changes To Forecasts   No changes to our FY14 forecasts for now

Rating Maintain UNDERPERFORM

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

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

Source: Kenanga