INVESTMENT HIGHLIGHTS

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

• All segments recorded rise in revenue despite drop in total sales volume

• Opex to sustain in-line with company’s Commercial Excellence initiatives

• First interim dividend of 14sen per share declared

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

Earnings recap. To recap, 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. 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 from 3,753.3million litres to 3,584.6million litres.

Opex level. For 1QFY17, the company’s operating expenditure increased by +12%yoy to RM306.1m largely due to increases in purchases of professional services as well as repair and maintenance. We are expecting opex to maintain at such levels in-line with the company’s Commercial Excellence initiatives.

Retail segment. Segment revenue increased by +26%yoy to RM3.25b despite sales volume declining by -7%yoy to 1,546.2million litres.

Commercial segment. Segment revenue for 3MFY17 expanded by +59%yoy to RM2,897.0. Sales volume declined -3%yoy to 1,619.5million litres.

LPG segment. LPG revenue also displayed an uptick in revenue of +8%yoy to RM390.2m but sales volume declined by -2%yoy.

Lubrication segment. 1QFY17 segment revenue increased +5%yoy to RM143.3m but sales volume declined by -2%yoy to 15.4million litres.

Lower sales volume across the industry. Overall volume declined by -4%yoy to 3,584.6million litres. Management guided that an industry-wide decline in sales volume was observed.

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

Impact on earnings. No changes to our earnings estimates.

Source: MIDF Research - 22 May 2017