INVESTMENT HIGHLIGHTS

• Petronas Dagangan Bhd’s (PetDag) 4QFY18 earnings slumped by -83.2%yoy to RM46.7m

• Revenue increased by +10.0%yoy while sales volume increased marginally by +1.0%yoy

• Fourth interim dividend of 25.0sen declared

• Maintain NEUTRAL with unchanged TP of RM27.53 per share

Below expectations. Petronas Dagangan’s 4QFY18 reported earnings declined by -83.2%yoy to RM46.7m despite a +10%yoy increase in revenue mainly attributable to: (i) the decline in MOPS prices in November and December; (ii) higher operating expenses and; (iii) higher spending on advertising and promotions. On a quarterly sequential basis, revenue is supported by volume growth from its commercial segment by +4.0%qoq. FY18 earnings accounted for 84.5% and 82.0% of our and consensus full year FY18 earnings estimates respectively.

Retail segment. Segment revenue increased by +2.6%yoy due to higher sales volume of +3.0% mainly contributed by Diesel. However, segment profit slumped by >100% due to margin compression as a result of decline in MOPS prices in November and December for Mogas and Diesel as well as; higher product costs for LPG. Additionally, there was also higher spending on advertising and promotion during the quarter.

Commercial segment. Segment revenue grew by +18.6%yoy mainly attributable to increase in average selling price by +20.0%yoy despite a -22.8% decline in volume due to the shifting of Diesel customers from Commercial segment to Retail segment as well as; decline in fuel oil volume decreased due to lower customer demand. This however, was negated by higher sales of Jet A1 contributed by increased demand from major customers.

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

Dividends. In line with its lower earnings, PetDag declared a fourth interim dividend of 25.0sen (vs 49.0sen in the same period last year). This brings its full-year dividend to 70.0sen which represents 82% payout of profit.

Source: MIDF Research - 27 Feb 2019