INVESTMENT HIGHLIGHTS

• Petronas Dagangan Bhd’s (PetDag) 1QFY18 reported earnings declined -13.7%yoy

• Sales volume declined by -4%qoq while ASP increased by +3%qoq

• First interim dividend of 13sen per share declared representing 59% payout ratio

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

Earnings in-line with forecasts. Petronas Dagangan Bhd’s 1QFY18 reported profit declined by -13.7%yoy to RM218.5m. On a quarterly sequential basis, revenue is supported by higher average selling price of +3%yoy offset by lower sales volume of -4%yoy. 3MFY18 earnings came in within our full year FY18 estimates at 22%, but fell short of consensus full year estimates by a variance of -5%. The lower yearover-year earnings and tapering sales volume is within our expectations.

Retail segment. Segment profitability declined largely due to increase in higher product costs and higher production of LPG cylinders to meet demand. The lower profitability is however partially offset by higher margin from the mogas division. In addition, lower profitability is also attributable to higher staffing costs.

Commercial segment. The increase in segment revenue year-overyear is attributable to volume growth and increase in ASP by +8% and +2% respectively. However, the decline in profitability is largely due to higher opex from higher staffing costs.

Impact on earnings. No changes to earnings forecasts.

Dividends. Declared first interim dividend of 13sen, representing 59% payout of profit.

Maintain BUY. We are maintaining our Buy recommendation on PetDag with an unchanged TP of RM28.00 per share. Our valuation is premised on PER18 of 28x pegged to EPS18 of 100.1sen. The target PER is based on PetDag’s average four-quarter rolling PER over the past five years.

Source: MIDF Research - 21 May 2018