Period

4Q15/FY15

Actual vs. Expectations

4Q15 results were within expectation with FY15 core net profit of RM1.78b coming in 1% and 2% below our estimates and market consensus, respectively.

The RM1.40b core earnings were adjusted for: (i) RM407.4m investment tax allowance posted in 2Q15, and (ii) RM38.1m unrealised forex gain on finance lease liability in 3Q15 or a loss of RM199.8m YTD.

Dividends

A 4rd interim NDPS of 17.0 sen was declared in 4Q15, (ex-date: 09 Mar; payment date: 23 Mar), totalling FY15 NDPS to 60.0 sen vs. 55.0 sen paid in FY14.

Key Results Highlights

Despite flattish revenue, 4Q15 core earnings fell 20% QoQ to 376.4m which was mainly driven by higher operating costs on plant repair and maintenance and higher lease and depreciation charges for Regasification (RGT). As a result, the decline in earnings was broad-based across all segments. EBIT for Gas Processing (GP) fell 30%, Gas Transportation (GT) contracted 14%, and Utilities plunged 63% while RGT dropped 12%. Similarly, 4Q15 core earnings also declined on a YoY comparison basis by 27% due to higher operating costs mentioned above despite a 2% growth in topline.

YTD, FY15 core profit slid 6% to RM1.78b from RM1.90b in FY14 as revenue dipped 1% over the year. The contraction in earnings was also due to the same reason as mentioned above on repair and maintenance cost for GP, GT and Utilities while RGT bottomline was hit by higher lease and depreciation charges. Meanwhile, share of profit from JV plunged significantly to RM75.2m from RM288.7m which was due to a one-off recognition of deferred tax asset arising from investment tax allowance granted for Kimanis Power Plant in 4Q14.

Outlook

With the Lahad Datu RGT already called off, the RAPID RGT in Pengerang is the only earnings catalysts for PETGAS, which will commence in 4Q17. Unlike its two other sister companies, namely PCHEM (OP; TP: RM7.50) and PETDAG (UP; TP: RM24.20), PETGAS is least affected by the crude oil price movement and earnings are mainly determined by business volumes of GP and GT while Utilities may be the only business segment likely to be affected by oil prices. Changes To

Forecasts

No changes in FY16 estimates and we launch our new FY17E number which we expect earnings to grow at 3.7%.

Rating

Maintain UNDERPERFORM

Valuation

Price target maintains at RM21.99/SoP share.

Risks

Delay in the commencement of Pengerang RGT.

Source: Kenanga Research - 25 Feb 2016