Period

4Q15/FY15

Actual vs. Expectations

FY15 core net profit of RM124.1m came in 8%/3% off house/street’s estimates, mainly due to the one-off additional billing for price differential between market price and regulated price for LNG.

Dividends

No dividend was declared in 4Q15 but we believe it will be decided upon completion of the audited account for FY15 in order for it to meet the 75% dividend payout policy which it needs another 3.0 sen to meet the requirement. x

Key Results Highlights

Despite revenue surging 30% to RM1.17b, 4Q15 core profit plunged substantially by 70% to RM10.3m from RM33.7m, mainly due to the additional billing mentioned above. This one-off additional billing also resulted in 4Q15 earnings declining 56% from RM23.3m last year although revenue was 50% higher than the RM780.5m recorded in 4Q14. The jump in topline was driven by two tariff rate adjustments of RM19.77/mmbtu and RM21.80/mmbtu in Nov 2014 and Jul 2015, respectively, from RM16.07/ mmbtu previously.

YTD, FY15 core income fell 37% to RM106.2m from RM167.6m, although revenue leapt 30% from FY14. This was due to the higher margin spread of RM2.02/mmbtu last year as opposed to RM1.58/mmbtu in FY15 besides the abovementioned additional billing. Similarly, the rise in revenue was due to the tariff adjustments mentioned above.

Outlook

We are not overly concerned about the additional billing as the adjustment will be in the coming quarters as the Gas Cost Pass-through mechanism was effective from Jan 2016. This will ensure the company a RM1.58/mmbtu profit margin spread in the future.

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

We keep FY16E numbers unchanged and introduce new FY17E numbers which earnings are expected to growth 17% on the back of: (i) unchanged profit margin spread of RM1.58/mmbtu, and (ii) higher utilisation rate of 92% vs. 90% in FY16.

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 revision in margin spread.

Source: Kenanga Research - 24 Feb 2016