KEY INVESTMENT HIGHLIGHTS

• PGB’s 4QFY19 earnings grew +52.6%yoy to RM485.3m attributable to higher revenue from gas processing and utilities

• Earnings was also boosted by higher contribution by Kimanis Power during the quarter

• Fourth interim dividend of 22sen and special dividend of 10sen declared for FY19

• FY20-21F earnings maintained

• Maintain NEUTRAL with unchanged TP of RM17.62 per share

PGB’s 4QFY19 earnings of RM485.3m came in above expectations. Petronas Gas Berhad’s (PGB) 4QFY19 normalised net profit came in at RM485.3m. This brings its FY19 cumulative earnings to RM1,948.0m which was above our but within consensus’ full-year earnings estimates at 106.1% and 103.2% respectively. Comparing against 4QFY18, revenue was flat at RM1,372.4m (-1.1%yoy) which was in-line with the downward revision in tariff from the implementation of Incentive Based Regulation (IBR). Meanwhile, earnings surged by +52.6%yoy as a result of higher contribution from Kimanis Power Sdn Bhd during the quarter. On a quarterly sequential basis, revenue grew by +2.6% whilst earnings increased by +12.4% respectively. This was mainly attributable to higher sales volume from utilities segment and higher Performance Based Structure (PBS) from Gas Processing segment.

Strong asset reliability at close to 100%. During the quarter, PGB registered higher earnings year-over-year during the quarter; largely attributable due to: (i) excellent plant and operational performance and reliability (close to 99% uptime for Gas Processing segment, near 100% uptime for Gas Transportation segment and near 100% uptime for Regasification segment); (ii) contribution of Performance Based Scheme from Gas Processing segment and; (iii) higher utilities segment revenue from the commissioning of the group’s Air Separation Unit in Pengerang.

Gas Processing. Segment revenue grew by +10.1%yoy to RM429.7m during the quarter primarily driven by the higher reservation charge under the 2nd term Gas Processing Agreement which was effective on 1st

January 2019, supported by PBS revenue. Meanwhile, the segment results surged by +31.0%yoy due to lower depreciation expense.

Gas Transportation. Both segment revenue and profit dipped by - 17.9%yoy and -21.3%yoy which was in-line with the lower gas transportation tariff under IBR. Gas transmission reliability was at near 100%. Correspondingly, the segment’s profit margin also dipped to 66.1% from 69% in 4QFY18.

Source: MIDF Research - 19 Feb 2020