• Maintain HOLD (TP: RM4.01). Gas Malaysia Berhad’s (GMB) 9MFY24 net profit of RM329mn (+18% YoY) was both above our expectation and consensus, making up 89% and 83% respectively. The company’s 3QFY24 headline profit rose by 35% YoY to RM116mn thanks to higher natural gas volume (+16% YoY) and favourable tolling fee due to higher approved capacity made by the Energy Commission (EC) for FY2024. No dividend declared. We upgraded earnings for FY24/FY25/FY26 by 5%/9%/16% to RM388mn/RM355mn/RM358mn as we revised upward our assumption of gas volume sold. Maintain a HOLD call on Gas Malaysia with a higher TP of RM4.01 (from RM3.83). Our valuation is derived from DCF with WACC of 6.3% and a long-term growth rate of 2%.

• Key highlights. 9MFY24 revenue however slightly declined by 5% YoY to RM5.9bn due to lower average natural gas selling price though higher volume of gas sold. Noted that Malaysia Reference Price (MRP) in 1QFY23 recorded the highest price level within 10 years at RM58.04/MMBtu.

• Earnings Revision. We upgraded earnings for FY24/FY25/FY26 by 5%/9%/16% to RM388mn/RM355mn/RM358mn as we revised upward our assumption of gas volume sold in view of the increase in demand amid economic expansion and gradual pick up drive to cleaner fuel in long term; switching from coal to gas in the power generation segment.

• Outlook. We expect earnings to remain solid in the upcoming quarters supported by potential pick-up demand from the Rubber Glove as well as Food, Beverage & Tobacco sector. However, we think this could be partially offset by the normalisation in gas price that will translate an average return on its non-regulated retail margin - where a fixed percentage is calculated from the gas cost.

Source: BIMB Securities Research - 26 Nov 2024