INVESTMENT HIGHLIGHTS

• Petronas Dagangan Bhd’s (PetDag) 1QFY17 reported earnings grew by +14.6%yoy to RM253.2m

• Both Retail and Commercial segment recorded sales growth of +23.2%yoy and +53.4%yoy respectively

• Sales and profit expanded despite overall decline in product volume sold

• First interim dividend of 14sen per share declared

• Maintain BUY with an revised TP of RM28.00 per share

Earnings on target. PetDag’s 1QFY17 reported earnings grew by +14.6yoy to RM253.2m. The commendable profit is premised on strong sales growth of +35.6%yoy for the quarter. The company’s 3MFY17 earnings kept pace with our and consensus expectations, accounting for 26.5% and 26.7% of earnings forecasts respectively.

Topline expansion attributable to ASPs. PetDag’s 1QFY17 sales grew by +35.6%yoy to RM6.7b largely due to higher average selling prices (ASP) of +43%yoy based on the Mean of Platts Singapore (MOPS) prices, despite volume shrinking by -4%yoy.

Retail segment. Segment revenue expanded commendably by +23.2%yoy to RM3.6b largely due to the overall increase in average selling prices of mogas and diesel by +31%yoy. The increase is partly offset by a decline in volume of -6%yoy. The segment operating profit also increased in tandem by +28.8%yoy to RM198.8m due to improved margin from LPG following competitive product cost.

Commercial segment. Similar with the Retail segment, the Commercial segment revenue also posted an increase to RM3.1b. However, the segment operating profit declined marginally by - 1.1%yoy to RM132.2m. The increase in sales is due to ASPs increasing by +60%yoy but the decrease in operating profit is attributable to higher operating expenditure.

Dividends. The company declared its first interim dividend for FY17 of 14sen per share, representing a payout ratio of 54.9%.

Impact on earnings. We are maintaining our earnings forecasts at this juncture pending updates from the analyst briefing.

Source: MIDF Research - 19 May 2017