• Maintain HOLD (TP: RM16.52). Petronas Gas Berhad (PetGas) 6MFY24 net profit of RM963mn was in line with our and consensus expectations at 50% respectively. 2QFY24 earnings slightly declined 1.0% YoY mainly dragged by weaker utilities segment. The segment’s revenue decreased by 4.6% YoY due to (i) lower product prices for steam and industrial gases and (ii) lower ICPT surcharge (2Q24: 17sen/kWh vs 2Q23: 20sen/kWh). A second interim DPS of 16sen was declared, bringing the YTD to 32sen which is similar to YTD23. We expect earnings to remain solid in coming quarters despite lower ICPT surcharge of 16sen/kWh for 2H24. Maintain a HOLD call on PetGas with DCF derived TP of RM16.52 (WACC: 8.0%, TG: 0.3%).

• Key highlights. 2QFY24’s earnings inched higher by 4% QoQ thanks to higher contribution from the joint ventures and associate which rose by 68% as compared to the preceding quarters.

• Earnings Revision. No changes to our forecasts.

• Outlook. ICPT surcharge is reduced to 16sen/kWh for 2H2024 (from 17sen/kWh). Nonetheless, we expect minimal impact to Utilities’ segment. Currently, the Pengerang LNG storage expansion project and the new gas compressor in Jeram are making steady progress, with anticipated completion dates set for mid-2025 and 2026, respectively. The group has also reached a final investment decision (FID) and is in final discussions with the government for a 100MW new power plant in Labuan.

Source: BIMB Securities Research - 21 Aug 2024