Period 2Q14/1H14
Actual vs. Expectations At 48%/47% of our/street’s FY14 full-year estimates, the 1H14 net profit of RM90.5m came in within expectations.
Dividends A 5 sen NDPS was declared in 2Q14, which was higher than the 6 sen paid in 2Q13.
Key Results Highlights The 2Q14 net profit leapt 18% QoQ to RM48.9m on the back of a 17% hike in revenue. Besides the new gas tariff structure which took effective in May 14 that attributed to higher topline growth, we believe the main earnings driver in 2Q14 was mainly higher sales volume as the 1Q14 is a festive quarter. The new gas tariff is expected to be earnings neutral as the margin spread, in fact, declined slightly to RM2.01/mmbtu from RM2.02/mmbtu previously.
On a YoY comparison, the 2Q14 net profit rose 9% from RM45.0m in 2Q13 as gas volume sold grew 1.9% which partly pushed revenue higher by 14%. YTD, 1H14 net profit jumped 6% to RM90.5m as revenue rose 11%. The improvement in topline was mainly driven by higher 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.
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 change to our FY14E-FY15E estimates.
Rating Upgrade to MARKET PERFORM from UNDERPERFORM
Valuation Share price has retreated 18% from its peak of RM2.23 in Oct 2013 and 5% in the past two months, to below our target price.
Even so, valuation is still not attractive enough to warrant an outright OUTPERFORM rating, with only a 3% upside.
As such, we upgrade GASMSIA to MARKET PERFORM from UNDERFORM at unchanged price target of RM3.54/DCF share.
Risks To Our Call A surprise increase in gas supply allocated by Petronas and wider margin spread.
Source: Kenanga
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