KEY INVESTMENT HIGHLIGHTS

• PetDag’s reported a quarterly profit of RM3.5m in 2QFY20, - 98.0% lower year-over-year
• Earnings impacted by lower sales volume of -39.0%yoy and lower ASP by -37.0%yoy during the quarter
• Earnings expected to improve in 2HFY20 with better MOPS price following improvement in crude oil price
• FY20-21F earnings trimmed by -21.3% and -9.7% respectively
• Maintain NEUTRAL with revised TP of RM19.31 per share

PetDag’s 2QFY20 earning of RM3.5m came in below expectations. Petronas Dagangan Berhad’s (PetDag) 2QFY20 reported profit came in at RM3.5m which was below our and consensus’ full-year earnings estimates. Comparing against 2QFY19, revenue dipped by - 61.5%yoy whilst its bottomline plunged by -98.0%yoy. The decline was mainly attributable to: (i) lower overall sales volume by -39.0%yoy and; (ii) lower overall average selling price by -37.0% during the quarter due to low MOPS price and the enforcement of movement control order (MCO) during the quarter which has restricted both movements of households as well as; businesses nationwide. Meanwhile, on a quarterly sequential basis revenue declined by -55.3%qoq whilst earnings dipped by -111.9%qoq respectively which was attributable to lower average selling prices and lower sales volume by -32.0%qoq and -35.0%qoq respectively during the quarter. However, the lower selling price and sales volume were offset by lower advertising and marketing costs during the quarter which helped to arrest the sharp decline in earnings.

Retail Segment. Segment revenue was recorded lower by -52.8%yoy as a result of: (i) lower sales volume of -32.0%yoy and lower average selling prices by -30.0%yoy during the quarter. The lower sales volume and average selling prices during the quarter was mainly attributable to: (i) the enforcement of MCO by the Malaysian government from 18th March 2020 to 2nd May 2020 and; (ii) low MOPS prices following the oil price war which has caused the crude oil price and WTI price to decline to an unprecedented level in the past 10 years. Consequently, the segment reported a loss during the quarter due to lower revenue from Mogas and Diesel. This was however; offset by lower advertising and promotional expenses during the quarter.

Commercial Segment. Segment revenue declined by -79.0%yoy during the quarter. This was mainly due to the decline in average selling prices by -44.0%yoy during the quarter coupled with the decline in sales volume by -47.0%yoy. The segment was hit hard following the enforcement of MCO which saw travel bans imposed for both domestic and international air travels as well as closure of industrial businesses to curb the spread of the novel coronavirus (Covid-19) pandemic.

Source: MIDF Research - 26 Aug 2020