Period  1Q14/3M14

Actual vs. Expectations The 1Q14 results came within expectations with net profit of RM41.6m which accounted for 22% of both our FY14 full-year estimates as well as market consensus.

Dividends  No dividend was declared, as expected.

Key Results Highlights 1Q14 net profit of RM41.6m rose 4% YoY from RM40.1m in 1Q13 on the back of an 8% hike in revenue to RM580.6m from RM535.4m previously. This was mainly driven by 10.2% growth in gas volume following the 40mmscfd gas supply secured from the Melaka RGT in July 2013 and another 30mmscfd extra gas supply, which started in January this year.

 Sequentially, the 1Q14 net profit grew 4% from RM40.2m in the preceding quarter, although topline dipped 4% from RM604.2m in 4Q13. This was partly attributed to improved operational efficiency, which reflected in its improved operating margin of 9% from 8% as operating cost reduced.

Outlook  With barely any change in its profit margin spread under the new tariff, FY14 is expected to be another strong year with full-year earnings impact from the 40MMScfd gas supply which started from July 2013 and another new additional 30MMScfd commencing Jan 2014 from the Melaka RGT.

 However, it may not be easy for GASMSIA to sustain profit margin spread going forward given the dynamic of LNG prices. Nonetheless, forward business volume will be supported by the last portion of the 40MMScfd additional gas supply from the Melaka RGT which will be coming on-stream in Jan 2015.

Changes To Forecasts No changes to our FY14-FY15 estimates.

Rating Maintain UNDERPERFORM

Valuation  We have rolled over our valuation base year to CY15, thus our new price target is now RM3.54/DCF share from RM3.41/DCF share previously.

Risks To Our Call  A surprise increase in gas supply allocated by Petronas and wider margin spread.

Source: Kenanga