INVESTMENT HIGHLIGHTS

• Petronas Dagangan Bhd’s (PetDag) 1QFY19 earnings surged by +33.3%yoy to RM291.2m

• Revenue was flat at +0.2%yoy whilst sales volume increased by +6.0%yoy

• Higher no. of stations in operation and higher Mogas and Diesel margins drove earnings

• First interim dividend of 15.0sen declared

• Maintain NEUTRAL with unchanged TP of RM27.02 per share

Within expectations. Petronas Dagangan’s 1QFY19 reported earnings increased by +33.3%yoy to RM291.2m despite a +0.2%yoy increase in revenue mainly attributable to: (i) higher number of stations in operation during the quarter; (ii) higher margins for Mogas and Diesel following increasing MOPS trend and; (iii) higher volume sold for Jet A1 and Diesel. On a quarterly sequential basis, earnings grew by >100%qoq due to the inventory lag losses the company experienced last quarter. Its 1QFY19 earnings accounted for 29.3% and 27.5% of our and consensus full year FY19 earnings estimates respectively.

Retail segment. Segment revenue was flat at +0.9%yoy due to the decline in average selling prices by -7.0%yoy. This was however offset by: (i) higher sales volume of +6.0% following improved station productivity; (ii) higher number of stations in operation vs same period last year and; (iii) introduction of the new PETRONAS PRIMAX 95 with Pro-Drive during the quarter. However, segment profit jumped by +37.7%yoy due to higher margins as a result of increasing MOPS prices Mogas and Diesel.

Commercial segment. Segment revenue grew marginally by +1.4%yoy mainly attributable to both increase in average selling price and sales volume. The increase in volume is mainly driven by higher Jet A1 sales following higher demand from existing customers and new contracts secured. Meanwhile, segment profit increased +23.5%yoy following improved margins and higher volume from Jet A1.

Impact on earnings. No changes to earnings forecasts and our target price, pending an analyst briefing to be held today.

Source: MIDF Research - 29 May 2019