Petronas Gas’ 1QFY13 net profit of MYR360.4m was in line with our and consensus  expectations,  accounting  for  24.0%  of  our  and  23.4%  of consensus’  full-year  forecasts.  We  make  no  changes  to  our  earnings estimate  but  raise  our  FV  marginally  to  MYR18.57  (from  MYR18.53)  as we  adjust  our  sum-of-parts  valuation  to  incorporate  a  higher  equity value for Gas Malaysia. Maintain NEUTRAL.

-  Within  expectations.  Petronas Gas’ 1QFY13 net profit was in line with our  and  consensus,  accounting  for  24.0%  of  our  and  23.4%  of consensus’  full-year  forecasts.  While  revenue  dipped  0.5%  y-o-y  to MYR910.4m,  net  profit  rose  8.1%  y-o-y  due  to  lower  depreciation expenses  in  1QFY13  as  a  result  of  a  review  on  a  property,  plant  and equipment,  major  components  and  useful  life  undertaken  by  the  group last year. The lower revenue was attributed to a lower export volume for propane and lower realized prices for both propane and butane.

-  Better  sequential  performance  (1QFY13  vs  4QFY12).  Revenue  grew by a marginal 0.2% q-o-q but net profit surged 22.1% q-o-q due to lower cost  of  revenue  and  a  higher  share  of  equity  accounted  profit  after  tax from associates and joint ventures.  

-  Maintain NEUTRAL. All in all, we believe that PTG’s earnings will remain stable for the remainder of the year for the following reasons:  i) fixed fee structure  under  the  Gas  Processing  and  Transmission  Agreement (GPTA),  and  ii)  potential  earnings  contribution  from  its  LNG Regassification Terminal business in Melaka. As we make no changes to our  earnings  forecast,  we  retain  our  NEUTRAL  call  on  the  stock.  We believe the stock’s valuations are lofty at 26.8x  on FY13 EPS and 25.1x on  FY14  EPS,  especially  when  stacked  against  its  low  dividend  yield  of 2.6%-2.8% for FY13-14. 

Source: RHB