PETRONAS GAS BHD

KLSE (MYR): PETGAS (6033)

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Last Price

16.40

Today's Change

+0.02 (0.12%)

Day's Change

16.38 - 16.46

Trading Volume

151,800

Overview

Market Cap

32,451 Million

NOSH

1,979 Million

Avg Volume (4 weeks)

849,900

4 Weeks Range

16.36 - 17.38

4 Weeks Price Volatility (%)

3.92%

52 Weeks Range

15.24 - 18.00

52 Weeks Price Volatility (%)

42.03%

Previous Close

16.40

Open

16.38

Bid

16.86 x 1,000

Ask

16.06 x 800

Day's Range

16.38 - 16.46

Trading Volume

151,800

Financial Highlight

Latest Quarter | Ann. Date

31-Mar-2022 [#1] | 19-May-2022

Next QR | Est. Ann. Date

30-Jun-2022 | 23-Aug-2022

T4Q P/E | EY

17.23 | 5.80%

T4Q DY | Payout %

5.00% | 86.16%

T4Q NAPS | P/NAPS

6.51 | 2.52

T4Q NP Margin | ROE

34.84% | 14.62%

Market Buzz
Company Profile

Sector: UTILITIES

Sector: UTILITIES

Subsector: GAS, WATER & MULTI-UTILITIES

Subsector: GAS, WATER & MULTI-UTILITIES

Description:

Petronas Gas Bhd is a Malaysian gas infrastructure and utilities company of which Malaysia?s nationalized oil corporation, PETRONAS, holds a majority interest. Petronas Gas segments its primary operations into Gas Processing, Gas Transportation, Utilities, and Regasification businesses. While each of these contributes significantly to the company?s total revenue, its Gas Processing and Gas Transportation units combine to generate the majority. In Gas Processing, Petronas Gas receives processing fees under multi-year contracts by processing natural gas piped offshore for its parent company, PETRONAS. The Gas Transportation business encompasses the transmission of offshore natural gas through pipelines to customers in Malaysia and Singapore under multi-year agreements with PETRONAS.

Discussions
2 people like this. Showing 50 of 1,346 comments

Alan Teh

With the current price right now should I invest on this stock?

2021-10-19 17:48

masterus

Forget $100, Options Traders Now Betting On Oil Prices Hitting $200
Speculative traders are betting on the options market that oil could exceed $100 a barrel by the end of this year and even reach a record $200 per barrel by the end of 2022

2021-10-20 12:18

observatory

It’s important to note that Petronas Gas is predominantly a utility company, not an oil & gas company. Don’t be deceived by the name “Gas”. The CEO already explains in The Star article I shared that its revenue and profits will not be much affected by gas price volatility.

In the research reports I read most analysts use the Sum of the Parts (SOP) valuation method – valuing different businesses independently and sum up the value.

I will do a sanity check on PetGas fair value based on a simpler approach. The starting point is I believe the current share price is not grossly over or undervalued. For a large cap company like PetGas, which is followed by many analysts and owned by many institutions, any major gap between price and value cannot persist for long. Opportunities will be identified and exploited, and share price corrected.

Based on current market price, I shall work backward to understand what are the assumptions behind. If the assumptions make sense, then the current market price will also make sense.

2021-10-20 21:43

observatory

The characteristics of PetGas are earning growth is slow but stable. It distributes most of its earnings as dividends with quarterly distributions. This means the simple Gordon Growth Model can be used.
https://www.investopedia.com/terms/g/gordongrowthmodel.asp

Past dividend records show that
1) From FY2007 to FY2010, DPS was RM0.50.
2) In FY2015, DPS was RM0.60
3) In FY2020 (latest full financial year), DPS was RM0.72 (excluding special dividends)

Using a CAGR calculator, its shows that dividend CAGR over the past 10 years is 3.7%, and over last 5 years is also 3.7%. The dividend has been growing at a nominal rate of about 3.7%. For context, in the 2010’s decade Malaysia GDP grew at about 4% to 5% in real term, or about 6% to 7% in nominal term.

Malaysia GDP growth rate will slow gradually in coming years (in Sep World Bank projected 5.8% in 2022 and 4.5% in 2023, in real term). So I shall make a bold assumption that PetGas future dividend growth rate is at a constant 3%.

2021-10-20 21:50

observatory

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.

2021-10-20 21:50

observatory

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

2021-10-20 21:50

observatory

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)

2021-10-20 22:00

observatory

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).

2021-10-20 22:00

0008

Post removed.Why?

2021-10-20 22:11

Alan Teh

thanks for the information

2021-10-21 11:14

James Ng

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

2021-10-21 21:01

masterus

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.

2021-10-22 19:29

Colgate

这只股票还能买吗?看起来很贵。

2021-10-27 07:22

unicornbird

this stock is for old people

2021-12-01 08:35

James Ng

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

2021-12-17 21:12

ivanlau

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

2021-12-26 08:45

Calvin882

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.

2021-12-26 16:07

Trade in Peace

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

2021-12-28 21:32

Calvin882

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-g...

2021-12-31 12:51

observatory

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_Peninsu...

Investors must have patience.

2021-12-31 23:16

Calvin882

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.

2022-01-01 07:20

observatory

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-res...

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.

2022-01-01 13:19

masterus

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.

2022-01-14 12:05

investor6688

Post removed.Why?

2022-02-22 16:50

unicornbird

why earning drop still pay higher dividend?

2022-02-23 08:26

AhSook AhKou

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

2022-02-23 08:29

unicornbird

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

2022-02-23 08:30

Calvin882

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

2022-02-23 13:18

observatory

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.

2022-02-24 00:29

masterus

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

2 months ago

guppycrow

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

2 months ago

unicornbird

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

2 months ago

ivanlau

------- 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 !!

2 months ago

masterus

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.

2 months ago

jianwei90

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

2 months ago

unicornbird

no benefit. Petgas only deliver gas locally

2 months ago

jianwei90

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

2 months ago

vcinvestor

@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.

2 months ago

jianwei90

i see, thanks a lot for the explanation :)

2 months ago

Icon 888

Good morning, taiko

2 months ago

unicornbird

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

2 months ago

unicornbird

the price keep dropping any idea what happen?

1 month ago

curiousmonke

Anyone know how to claim the AGM door gift?

3 weeks ago

petronasgloves

More discount. buy more

6 days ago

petronasgloves

Best time to picking up

6 days ago

unicornbird

observatory what do you think of the recent quarter?

5 days ago

observatory

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.

4 days ago

unicornbird

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

4 days ago

observatory

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

3 days ago

kpowersohai

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??

15 hours ago

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