Period

1Q15

Actual vs. Expectations

The 1Q15 results came within expectations with net profit of RM449.9m which made up 25% of both house and street’s FY15 estimates.

Dividends

A 14.0 sen NDPS was declared in 1Q15, (ex-date: 26 May; payment date: 16 Jun), vs. 15.0 sen paid in 4Q14.

Key Results Highlights

The 1Q15 net profit fell 21% QoQ to RM449.9m from RM571.3m in 4Q14 while revenue dipped slightly by 1% over the quarter. The decline in earnings was mainly due to lower share of profits from JV (RM23.8m vs. RM242.3m) due to the recognition of a deferred tax asset in 4Q14 arising from the investment tax allowance granted for Kimanis Power Plant (KPP). The drop in revenue was due to lower Gas Transportation (GT) revenue, which fell 2% to RM323.2m, on shorter working month in February.

YoY, 1Q15 net profit rose 8% from RM418.0m on the back to 4% hike in revenue. This was driven by: (i) new rate effective Apr-14, which saw Gas Processing (GP) earnings rising 15%, and (ii) higher transportation volume, which boosted GT earnings by 10%. While Regasification (RGT) posted flattish earnings, Utilities unit posted earnings, which rose 18% to RM56.1m due to lower depreciation as a result of impairment and disposal of asset in the preceding quarter.

Outlook

Although there is still no progress on the Lahad Datu RGT, the RAPID RGT in Pengerang will be the next earnings catalysts for PETGAS. In addition, PETGAS announced yesterday that the MoU signed with Linde (M) Sdn Bhd in Nov 2014, for the development of the Air Separation Unit in Pengerang Integrated Complex, is now only expected to finalise by end of the year.

Unlike its two other sister companies, namely PCHEM (OP; TP: RM6.37) and PETDAG (MP; TP: RM21.60), PETGAS is least affected by the crude oil price movement and earnings are mainly determined by business volumes of gas processing and transportation while Utilities may be the only business segment likely to be affected by oil prices. Changes To

Forecasts

No changes to FY15E and FY16E numbers.

Rating

Maintain MARKET PERFORM.

Valuation

Price target is maintained at to RM22.02/SoP share.

Risks

Delay in the commencement of Lahad Datu RGT.

Source: Kenanga Research - 13 May 2015