Petronas Gas (PTG)’s 1H13 core net profit of MYR713.8m was within our and  consensus’ forecasts,  accounting  for  47.5%  and  46.7%  of  both estimates respectively. We retain our NEUTRAL call, with an unchanged FV  of  MYR18.57,  as  the stock’s valuations are lofty at 26.4x  FY13  EPS and  24.7x  FY14  EPS,  especially  given  its  low  dividend  yields  of  2.6%-2.8% for FY13-14.   

- Slightly weaker q-o-q and y-o-y.  Stripping off a one-off investment tax allowance  amounting  to  MYR591.6m  for  its  liquefied  natural  gas  (LNG) regasification  terminal  in  Melaka  PTG’s  1H13  core  net  profit  of MY713.8m  (-2.0%  q-o-q,  -9.9%  y-o-y)  was  within  our  and  consensus estimates. However, its profit was slightly weaker q-o-q and y-o-y despite a  marginal  revenue  growth  of  2.2%  q-o-q  and  2.2%  y-o-y  as  PTG recorded a gain on disposing of its Gas Malaysia shares last year.  

- LNG  regasification  terminal  in  Melaka  begins  operation.    The commencement  of  its  LNG  regasification  terminal  operation  during  the quarter  contributed  revenue  amounting  to  MYR17.4m.  However,  the segment registered a small loss of MYR2.8m in relation to pre-operating expenses.

- Declares interim dividend. PTG has declared an interim dividend of 15 sen per share under the single tier system, representing 28.3% of our full year  forecast  dividend  of  53  sen.  Given  the  lumpy  investment  tax allowance  granted  to  PTG,  we  do  not  discount  the  potential  of  the company paying a higher dividend this year.

- Maintain NEUTRAL. All said, we believe that PTG’s earnings will remain stable for the remainder of the year for the following reasons:  i) its 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  forecasts,  we  retain  our  NEUTRAL  call  on  the  stock.  We believe its valuations are lofty at 26.4x on FY13 EPS and 24.7x on FY14 EPS,  especially  stacked  against  its  low  dividend  yield  of  2.6%-2.8%  for FY13-14.  

Source: RHB