INVESTMENT HIGHLIGHTS

• Petronas Dagangan Bhd’s (PetDag) 3QFY18 earnings declined by -19.0%yoy to RM270.3m

• ASP increased by +7.0%yoy while sales volume increased marginally by +2.0%yoy

• Third interim dividend of 16sen declared

• Maintain BUY with unchanged TP of RM30.08 per share

Within expectations. Petronas Dagangan’s 3QFY18 reported earnings declined by -19.0%yoy to RM270.3m mainly attributable to higher spending on advertising and promotion. On a quarterly sequential basis, revenue is supported by higher average selling price of +2.0% and higher sales volume for both retail and commercial by +3.0% and +7.0% respectively. 9MFY18 earnings accounted for 80.1% and 78% of our and consensus full year FY18 earnings estimates respectively.

Retail segment. Segment revenue increased by +8.6%yoy attributable to increase in average selling prices by +7.0% and higher sales volume of +2.0% mainly contributed by Diesel. However, segment profit declined by -11.1% due to higher spending on advertising and promotion as well as; lower gain on fixed asset disposal.

Commercial segment. Segment revenue grew by +19.5%yoy mainly attributable to increase in average selling price by +31.0%yoy despite a -8.0% decline in volume due to the shifting of Diesel customers from Commercial segment to Retail segment as well as; lower demand for Jet A1. Additionally, fuel oil volume decreased due to lower customer demand.

Impact on earnings. No changes to earnings forecasts pending an analyst briefing to be held today.

Dividends. Declared third interim dividend of 16sen, representing 59% payout of profit.

Maintain BUY. We are maintaining our BUY recommendation on PetDag with an unchanged TP of RM30.08. Our valuation is premised on forward PER19 of 26x pegged to EPS19 of 115.7sen. The target PER is based on PetDag’s rolling four-quarter average PER over five years.

Source: MIDF Research - 28 Nov 2018