Posted by observatory > 2021-10-20 21:50 | Report Abuse

Next is cost of equity (COE).

PetGas is stable company, a reliable dividend stock with good corporate governance. It enjoys gas distribution monopoly. Its revenue and profits are shielded from gas price fluctuation as it’s largely determined by Regulatory Asset Based pricing, and the long term gas processing agreement with its parent company Petronas.

Besides the demand for natural gas is likely to persist for at least several more decades as gas is the cleanest form of fossil energy. The Energy Commission projects gas demand to increase from 2030 onwards by replacing coal in power generation.

Based on above I will assign my own standard of “good” company COE which is 8%.

Cross check my choice against CAPM model:
Beta = 0.75 (average of Reuters 0.87, and Market Watch 0.65)
Risk free rate = 3.6% (based on latest Malaysia government 10 year bond yield)
Equity risk premium = 5.9% (based on Damodaran)
CAPM COE = 3.6% + 0.75*5.9% = 8%, which coincidentally fits almost perfectly at this moment.

Posted by observatory > 2021-10-20 21:50 | Report Abuse

Given FY2020 DPS = RM0.72, FY2021 DPS is projected to be RM0.72 * (1 + 3%) = RM0.7416
Applying the Gordon Growth Model, value per share
= next year dividend / (COE – growth rate)
= RM0.7416 / (0.08 – 0.03)
= RM14.83

Posted by observatory > 2021-10-20 22:00 | Report Abuse

However, there is still value to be extracted from PetGas. The company has an overly conservative balance sheet which is slightly net cash. Given its stable operating cashflow, it should be able to assume more debt without compromising on its financial health.

Based on the latest Financial Position as of 2QFY21, net cash = RM3,455m – RM3,306m – RM147m = RM2m. Its cash and borrowings are roughly in balance.

Shareholders’ Equity = RM12,745m. Assume its optimal net debt to equity ratio is 30%, it can release RM12,745m * 30% = RM3,824m of capital as future special dividends.

Dividend by number of shares, potential special dividend per share = RM3,824m/ RM1,979m = RM1.93

(Note: Capex per year is slightly above RM1 billion. I assume it will fund next 3 to 4 years of capex mostly with borrowings, and return the excess operating cash received in the form of special dividends.

If that happens, can expect 48 to 64 sens of special dividends per year for next 3-4 years, providing a one time boost of dividend yield from RM0.74 / RM17 = 4.4% to 7.2%- 8.1%.

Rightfully the assumed future special dividends should be discounted back to present value based on 8%, but I just ignore the effects)

Posted by observatory > 2021-10-20 22:00 | Report Abuse

Adding to the earlier value calculated from Gordon Growth Model, the value per share = RM14.83 + RM1.93 = RM16.76.

This is close to the current market price at about RM17.

Of course, Gordon Growth Model is a simplistic method. Besides like any other discounted cashflow method that projects cashflows into eternity, any slight change in assumptions could give vastly different result.

Another factor not considered is the tariff for Regulatory Period 2 (RP2) for Year 2023 to 2025. The future tariff as determined by Energy Commission in 2022 will affect share price.

Putting aside these factors, if one believes the assumptions used are reasonable, then current market price should also be reasonable. If the price is right, it will mean over a long period of time, a long term shareholder who purchases PetGas at today price can expect an annual rate of return of about 8% (the cost of equity).

Posted by 0008 > 2021-10-20 22:11 |

Post removed.Why?

Posted by Alan Teh > 2021-10-21 11:14 | Report Abuse

thanks for the information

Posted by James Ng > 2021-10-21 21:01 | Report Abuse

https://klse.i3investor.com/blogs/general/2021-10-21-story-h1592824633.jsp
[转贴] [Video:浅谈PETRONAS GAS BHD, PETGAS, 6033] - James的股票投资James Share Investing

Posted by masterus > 2021-10-22 19:29 | Report Abuse

Brent Oil Hits $86 On Dwindling U.S. Inventories
By Tsvetana Paraskova - Oct 21, 2021, 9:15 AM CDT
Brent Crude prices hit $86.10 per barrel early on Thursday, jumping to the highest level in three years, before retreating to just above $85 amid profit-taking.

Driven by signs of tighter oil supply and a bullish EIA weekly inventory report on Wednesday, oil prices rose early on Thursday, with the international benchmark, Brent Crude, rallying to $86.10—the highest price since October 2018. The U.S. benchmark, WTI Crude, settled at a fresh seven-year high on Wednesday and was up early on Thursday before pulling back later in the morning.

Posted by Colgate > 2021-10-27 07:22 | Report Abuse

这只股票还能买吗？看起来很贵。

Posted by unicornbird > 2021-12-01 08:35 | Report Abuse

this stock is for old people

Posted by James Ng > 2021-12-17 21:12 | Report Abuse

https://klse.i3investor.com/blogs/general/2021-12-17-story-h1595657720.jsp
[转贴] [Video:浅谈PETRONAS GAS BHD, PETGAS, 6033] - James的股票投资James Share Investing

Posted by ivanlau > 2021-12-26 08:45 | Report Abuse

Worldwide LNG price keep increasing, today closing 17.30 consider undervalue . Fair value in 2022 will be around rm 19 - 20.

Posted by Calvin882 > 2021-12-26 16:07 | Report Abuse

Short term TP should be more than RM20 for this giant. The business bode well with current rapid transition to low carbon economy where LNG is expected to replace diesel and petrol especially for industrial applications.

Posted by Trade in Peace > 2021-12-28 21:32 | Report Abuse

多头趋势，守住10日均线跌破减码，空手等拉回月均线布局，千万不能跌破月均线
https://www.youtube.com/watch?v=U4DhRvkntOo

Posted by Calvin882 > 2021-12-31 12:51 | Report Abuse

As expected, Petgas will plays an important role in the nation's transition to low carbon economy.

https://www.thestar.com.my/business/business-news/2021/12/31/natural-gas-to-play-major-role-in-carbon-emission-cut

Posted by observatory > 2021-12-31 23:16 | Report Abuse

It's expected that the industry lobby wants gas to play a greater role.

But according to the government plan, the share of gas in power generation capacity will fall from 45% in 2021 to 36% in 2029, before picking up from 2030 onwards. Refer page 12.

https://www.st.gov.my/en/contents/files/download/169/Report_on_Peninsular_Malaysia_Generation_Development_Plan_2020_(2021-2039)-FINAL.pdf

Investors must have patience.

Posted by Calvin882 > 2022-01-01 07:20 | Report Abuse

Note that the plan is expecting renewable energy will slowly take a bigger portion to replace the non renewable energy such as coal and gas. However, I personally foresee adoption of renewable energy will be slower than expected and companies and power generators will face increasing pressure to phase out coal. Knowing that gas emits 50% less carbon emissions than coal, gas is the next best option that can fill the gap for many years to come.

Posted by observatory > 2022-01-01 13:19 | Report Abuse

The common obstacle to rapid renewable energy adoption is intermittency problems, which can only be mitigated with advances in energy storage and continent size smart grid that even out fluctuations in power generation.

However Malaysia has the unique advantage (or problem) with too much power generation capacity due to poor planning in the past. Power reserve margin is in the range of 35% to 40%.

https://www.thestar.com.my/business/business-news/2020/07/15/power-reserve-margin-to-rise-above-40

Some say the optimum reserve margin should be 15%

https://www.malaysiakini.com/letters/564186

The problem is too many coal fired power plants have been commissioned. The last one came online just about a year ago. In order not to prematurely scrap the investment, coal fired power plants will only start phasing out in 2030s and the last one in 2044.

But demand for power is no longer fast growing even after the pandemic. As economy becomes more advanced the energy intensity per unit of GDP declines.

All new power plants will be in the renewable space, and they continue adding to the already abundant spare capacity. There isn't much room for gas plants. Not until coal plants get phasing out.

Posted by masterus > 2022-01-14 12:05 | Report Abuse

Oil prices could hit US$100 as demand outstrips supply, analysts say

LONDON (Jan 12): Oil prices that rallied 50% in 2021 will power further ahead this year, analysts predict, saying a lack of production capacity and limited investment in the sector could lift crude above US$100 a barrel.

Posted by investor6688 > 2022-02-22 16:50 |

Post removed.Why?

Posted by unicornbird > 2022-02-23 08:26 | Report Abuse

why earning drop still pay higher dividend?

Posted by AhSook AhKou > 2022-02-23 08:29 | Report Abuse

Why not? Prefer money in my pocket than waiting ........

Posted by unicornbird > 2022-02-23 08:30 | Report Abuse

of cos i like also, but are they doing well?

Posted by Calvin882 > 2022-02-23 13:18 | Report Abuse

I foresee Petgas will be one of the main beneficiary from global transition to environment friendly energy.

Posted by observatory > 2022-02-24 00:29 | Report Abuse

The dividend is made up of 22 sen + 10 sen special dividend. The company should continue to pay special dividends in excess of earnings.

Right now it's in a net cash position, which is financially inefficient. PetGas could have taken on a lot more debt with very low interest rate, and return excess capital to shareholders. Just look at Tenaga's gearing level.

Debt servicing interests could be easily met by its stable cash flow.

PetGas business has limited growth prospect. As commented before, it will not benefit from the transition to cleaner fuel, at least not until 2030. The roadmap has already been laid down by the Energy Commission.

The only way to justify current share price is to become more efficient with capital by increasing the debt level.

Posted by masterus > 2022-02-28 12:36 | Report Abuse

Brent crude oil price already break $100 and above per barrel

Posted by guppycrow > 2022-03-01 10:45 | Report Abuse

Tapis crude discount on apex sgx and australia aip proxy player. Buy strong front row.

Posted by unicornbird > 2022-03-05 12:30 | Report Abuse

observatory, any idea why Petgas peak at $24 in 2014, then keep going downtrend over the years?

Posted by ivanlau > 2022-03-06 19:05 | Report Abuse

------- quote -----
Stock: [PETGAS]: PETRONAS GAS BHD

Dec 26, 2021 8:45 AM | Report Abuse

Worldwide LNG price keep increasing, today closing 17.30 consider undervalue . Fair value in 2022 will be around rm 19 - 20.
---------- unquote ----
today closign 17.70 !!

Posted by masterus > 2022-03-07 13:27 | Report Abuse

Oil Prices Break $130 As EU And U.S. Allies Consider Ban On Russian Crude
U.S. Secretary of State Antony Blinken has confirmed the United States is talking to its European allies about banning Russian oil imports.

Posted by jianwei90 > 2022-03-08 16:54 | Report Abuse

if western countries really ban gas import from russia, does petgas enjoy any benefit from this?

Posted by unicornbird > 2022-03-08 18:07 | Report Abuse

no benefit. Petgas only deliver gas locally

Posted by jianwei90 > 2022-03-09 09:32 | Report Abuse

if gas price increase worldwide, will it benefit petgas as well?

Posted by vcinvestor > 2022-03-09 09:37 | Report Abuse

@jianwei90, no. earnings for Petgas governed by the cost pass through mechanism (same as TNB) so increase in commodity price has no net effect on both counters.

Posted by jianwei90 > 2022-03-09 10:19 | Report Abuse

i see, thanks a lot for the explanation :)

Posted by Icon 888 > 2022-03-24 00:43 | Report Abuse

Good morning, taiko

Posted by unicornbird > 2022-03-25 16:28 | Report Abuse

this kind of sure profit company, why the government want to list it?

Posted by unicornbird > 2022-03-30 17:38 | Report Abuse

the price keep dropping any idea what happen?

Posted by curiousmonke > 2022-04-30 18:24 | Report Abuse

Anyone know how to claim the AGM door gift?

Posted by petronasgloves > 2022-05-19 11:53 | Report Abuse

More discount. buy more

Posted by petronasgloves > 2022-05-19 11:53 | Report Abuse

Best time to picking up

Posted by unicornbird > 2022-05-20 08:50 | Report Abuse

observatory what do you think of the recent quarter?

Posted by observatory > 2022-05-20 23:57 | Report Abuse

Higher tax due to Cukai Makmur has been expected.

But the impact of higher fuel gas costs is unexpected. Among PGB four businesses, only Utilities have non pass-through input gas cost. Utilities gross profit has reduced substantially by over 70% YoY, from RM75m to RM22m.

Gross profits have also declined across three other businesses. But according to Hong Leong analyst, "PGB will be able to recoup back the higher fuel cast costs for its Transportation and Regasification segments in subsequent period"

Looking further ahead, need to watch out whether earnings will be reduced under RP2 (Regulatory Period 2) which runs from 2023 to 2025.

Posted by unicornbird > 2022-05-21 11:28 | Report Abuse

Thanks obs. Do you think Petgas can raise utilities price, to cover higher gas cost?

Posted by observatory > 2022-05-21 17:57 | Report Abuse

I'm not sure. According to Hong Leong, "tariff pricing is matched to Tenaga’s pricing (reviewed half yearly)"

Posted by kpowersohai > 2022-05-24 23:14 | Report Abuse

this stock ah if u see carefully the revenue kept increasing over and over the years but the share price kept dropping and dropping, so can u see the disconnection between the share price and the fundamental??

Posted by unicornbird > 2022-05-29 16:50 | Report Abuse

isn't that good? higher revenue, and lower share price

Posted by petronasgloves > 2022-05-30 15:51 | Report Abuse

Discount and buy

Posted by LouiseS > 2022-05-31 14:34 | Report Abuse

PETRONAS GAS，值得投资吗？
PETRONAS GAS BERHAD 2021 年度财报分析
https://youtu.be/uE9-ndB93Fo

Posted by bullmarket1628 > 2022-05-31 23:26 |

Post removed.Why?