Period

3Q15/9M15

Actual vs. Expectations

At 71%/73% of house/street’s full-year FY15 estimates, the 9M15 net profit of RM95.9m came within expectations.

Dividends

No dividend was declared as expected.

Key Results Highlights

3Q15 net profit remained flat QoQ at RM33.7m despite a 13% surge in revenue thanks to higher volume of gas sold but was offset by higher tax charges. Meanwhile, the share of JV results failed to stay profitable and sank into the red again amounting RM0.5m from a profit of RM0.8m previously.

YoY, 3Q15 net profit dropped 37% from RM53.8m despite a 22% increase in topline largely attributable to weakening EBIT margin to 5% from 9% in 3Q14 as the margin spread decline from RM2.02/mmbtu to RM1.58/mmbtu currently.

Similarly, 9M15 net profit plummeted 34% to RM95.9m from RM144.3m in 9M14 although revenue leapt 23% over the period. The fall in bottomline was mainly due to the higher margin spread last year at RM2.02/mmbtu while the rise in revenue was attributable to higher tariff rate of RM19.77/mmbtu, effective Nov 2014, from RM16.07/mmbtu previously.

Outlook

With the profit margin spread being fixed at RM1.58/mmbtu, earnings visibility is expected to be high as opposed to the 4Q14-1Q15 period where earnings were hit by margin compression as business volume increased which meant that the expensive LNG component increased.

Meanwhile, the 5-year RM700m-RM800m capex on pipeline expansion shows that GASMSIA is confident of securing additional new gas supply from its current 492mmscfd guaranteed supply from Petronas which could be a new earnings catalyst. Changes To

Forecasts

FY15-FY16 estimates remain unchanged.

Rating

Maintain OUTPERFORM

Valuation

Our target price is maintained at RM2.68/DCF share

Risks To Our Call

A sudden change in cost-pass through mechanism with downward revising in margin spread.

Source: Kenanga Research - 27 Nov 2015