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

• Lower diesel volume recorded for both retail and commercial segments

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

Earnings in-line with forecasts. To recap, 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 year-over-year earnings and tapering sales volume is within our expectations.

Retail segment. Segment revenue declined both y-o-y (-1%) and q-oq (-0.7%) premised on sales volume declines of -3%yoy and -1%qoq. Lower sales volume is visible across the market due to market degrowth and closure of stations.

Commercial segment. On the contrary, commercial segment recorded an increase of +11%yoy attributable to sales volume increase of +8%yoy. This is largely attributable to higher fuel oil and sulphur from higher bunker sales.

LPG segment. Revenue increased by +5%yoy attributable to a +6% increase in sales volume. The increase is premised on the implementation of new incentive programmes and higher demand from major customers.

Lubricant segment. Segment revenue and sales volumes declined by -2%yoy and -7%yoy respectively. The declines are a result of lower market demand.

Sales volume expected to remain challenging. Moving forward into this year, the sales volume is expected to remain challenging from market de-growth as well as closure of stations for refurbishment activities.

Source: MIDF Research - 22 May 2018