KEY INVESTMENT HIGHLIGHTS

• 9MFY24 revenue down -5%yoy; earnings up +18%yoy and came in within expectation
• Lower revenue from lower ASP, higher earnings from higher volume sold and increased tolling fee
• Demand growth expected until end-year, amid lower Brent prices
• Maintain BUY with a revised target price of RM4.09

Maintain BUY, TP:RM4.09. Gas Malaysia Bhd (GMB)'s 9MFY24 results were within our expectations at 72%. We maintain our BUY call for GMB with a revised target price of RM4.09 (previously RM3.96) as we rollover the valuation to FY25.

9MFY24 revenue down -14%yoy. GMB's 9MFY24 revenue slipped - 4.6%yoy to RM6.0b. This was attributable to the lower average natural gas selling price (ASP), mitigated by higher volume of natural gas sold and higher tolling fee.

9MFY24 normalised earnings up +18%yoy. 9MFY24 normalised earnings gained by +18.3%yoy to RM325.4m. This was mainly due to:

(i) higher volume of natural gas sold, (ii) higher tolling fee, and (iii) higher contribution from JV companies. These were partially offset by higher admin expenses and higher finance costs.

Resilient amid lower Brent. Despite the lower Brent crude price is expected until end-year (YTD24: USD80pb; CY23 average: USD82pb) to affect the ASP, we opine that GMB's resilient performance would sustain, in tandem with Malaysia's economic growth for the remainder of FY24.

However, the oil market remains volatile coming into FY25, hence we remain vigilant for GMB's performance moving forward. Nonetheless, we are positive that GMB will continue to improve its operational efficiency, maintain competitiveness and expand its business, to deliver a decent performance by the end of FY24.

Revised earnings forecast. Although 9MFY24 earnings came in within expectations, we revised our earnings estimates for FY25-26 by -17% and -20% respectively. The downward revision is to rebalance the earnings estimates in accordance to an expected lower Brent crude price average of USD75-78pb in CY25, which could impact GMB's average selling prices moving forward. Nevertheless, as we rollover to FY25 valuations, we update our target price to RM4.09, by pegging a PER of 11x to a revised EPS25 of 37.3sen. The PER is a slight discount from GMB's 5-Y historical average of 12x, as we take into account of the impact from oil price volatility and global economic uncertainties moving forward. We maintain a BUY call for GMB.

Source: MIDF Research - 26 Nov 2024