KEY INVESTMENT HIGHLIGHTS

• Gas Malaysia’s 3QFY19 reported earnings met expectations at RM42.0m

• Both revenue and earnings were mainly driven by higher volume of natural gas sold and higher natural gas tariff

• Volume growth from acquisition of new customers will drive growth in FY20

• FY19-20F earnings maintained

• Maintain BUY with an unchanged TP of RM3.11 per share

3QFY19 earnings grew +2.4%yoy to RM42.0m. Gas Malaysia Berhad’s (GMB) 3QFY19 earnings came in at RM42.0m. This brings its 9MFY19 cumulative earnings to RM132.2m which is within our and consensus full-year FY19 earnings expectations at 72.8% and 70.9% respectively. During the quarter, revenue expanded by +12.8%yoy whilst earning grew marginally by +2.4%yoy primarily driven by higher volume of natural gas sold during the quarter and higher natural gas tariff. On a quarterly sequential basis, both revenue grew marginally by +1.1% whilst earnings contracted by -14.3%qoq. This was mainly attributable to higher operating expenses and higher finance costs booked during the quarter.

Gas sales volume expected to continue to expand in FY19. We reiterate our view that gas sales volume for FY19 will continue to sustain and register year-over-year growth. Our current gas volume growth projection remains between 5.0-5.5%, similar to that of FY18. Our assumption is premised on resilient national GDP growth for 2019.

New customer acquisitions to drive growth. While we opine that FY19F’s gas volume sold will sustain at current level for the remaining of the year, the Management has recently guided that FY20F will see growth coming in from the increase in volume of gas sold in-line with its recently acquired customers. Our recent meeting with the Management signals that growth in the gas sales volume will continue to be driven primarily by rubber, oleo-chemical, consumer products and glass manufacturing industries. Hence, we are expecting a +6.3%yoy increase in EPS due to this.

Impact on earnings. We made no changes to our earnings estimates at this juncture as we are expecting Gas Malaysia to meet our FY19F earnings projection.

Source: MIDF Research - 15 Nov 2019