Despite the sequential improvement, 9MFY21 results were deemed below expectations amidst slower sales volumes. Nonetheless, as borders gradually reopen, we expect sales volumes to recover in the coming quarter and accelerate in FY22. Maintain MP and TP of RM18.90.

9MFY21 deemed below expectations. 9MFY21 recorded core net profit of RM385m, making up 63%/67% of our/consensus full-year earnings forecast. We deem this to be below expectation due to the slower sales volumes affected by the nationwide movement restriction orders throughout the year. However, announced interim dividend of 20.0 sen per share – bringing YTD dividends to 44.0 sen, is deemed to still be broadly within expectations amidst the higher pay out.

Sequential improvement. QoQ, 3QFY21 core net profit of RM119m improved 47%, helped by higher sales volumes and margin mix from its commercial segment, coupled with lower opex by RM45m for its retail segment compared to the previous quarter from lower dealer commission. YoY, however, earnings were down by 43% amidst overall poorer sales volumes across both sectors.

Cumulatively, 9MFY21 CNP saw a YoY jump of 72% given higher product margin spreads on the back of the rising trend of oil prices, especially in the 1H of the year.

Sales volumes to improve going forward. As borders gradually reopen under the “National Recovery Plan”, together with the resurgence of interstate and international travels, coupled with resumption of economic activities, we believe PETDAG should see higher overall sales volumes in 4QFY22 and even more so in FY22.

Maintain MARKET PERFORM, with unchanged TP of RM18.90 at FY22E PER of 26x. Post results, we trimmed our FY21E earnings by 10% to account for lower sales volume and product margin assumptions.

Risks to our call include: (i) better-than-expected ASPs, and (ii) higher-than-expected sales volumes.

Source: Kenanga Research - 29 Nov 2021