RHB Research

Petronas Gas - Another Steady Quarter

kiasutrader
Publish date: Mon, 02 Nov 2015, 09:14 AM

PGas 9M15 results were broadly within expectations. Maintain NEUTRAL with a MYR22.40 TP (3% downside). While we expect significant earnings growth in FY18F on a maiden contribution from the Pengerang regasification terminal, we see the potential earnings upside has been well reflected at current levels. A 15sen dividend was declared, bringing the YTD dividend declared to 43sen.

Growth bolstered by deferred tax assets. Petronas Gas (PGas) 9M15 earnings were broadly inline with ours and consensus expectations at 73.6% and 76.4% respectively after adjusting for forex losses of MYR231.7m (3Q15: MYR167.5m) and recognition of deferred tax assets worth MYR407.4m.

9M15 EBIT grew 5.1% YoY. EBIT growth (3Q15: +2% YoY) was driven by the gas processing and transportation units on a higher reservation charge and capacity booked under the new agreement respectively. Meanwhile, the utilities and regasification units posted lower earnings. The utilities unit saw lower offtakes from customers during the period while the regasification unit was impacted by higher maintenance costs despite benefiting from the strengthening USD.

Pengerang regasification next growth catalyst. Construction for the regasification terminal in Pengerang, Johor with an annual capacity of 3.5m tonnes (vis-à-vis 3.8m tonnes of the existing Melaka regasification terminal) is expected to start this year with a targeted commercial operations date by 4Q17.

Risks. We make no changes to our forecasts. Some of the key risks are: i) missing efficiency targets which leads to lower performance-based incomes, ii) lower gas transportation volumes, and iii) completion of the Pengerang regasification terminal being delayed.

Maintain NEUTRAL. PGas offers strong long-term fundamentals fueled by rising gas demand while we expect a structural earnings growth in FY18F, boosted by its 65%-owned MYR2.7bn regasification terminal project in Pengerang. Our SOP-based MYR22.40 TP remains unchanged. We value Petronas Gas’ core operations based on DCF, ascribing a discount rate that is equivalent to its WACC of 7.1% and a terminal growth rate of 2% (see Figure 2).

 

 

 

 

 

Source: RHB Research - 2 Nov 2015

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