Gas Malaysia’s earnings in FY17 surpasses expectations
KUALA LUMPUR: Gas Malaysia Bhd’s (Gas Malaysia) financial year 2017 (FY17) earnings have surpassed expectations, with analysts now revising upwards their FY18 earnings forecast for the group.
In a filing on Bursa Malaysia, Gas Malaysia reported that the group’s profit before zakat and taxation for the financial year ended December 31, 2017 was at RM248.2 million, an increase by 16.6 per cent compared to RM212.8 million in the corresponding period last year.
Gas Malaysia’s FY17 core profit of RM199.1 million came 21 per cent above the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) house forecast as well as market consensus.
This was due to higher sales volume of 183.9 million mmbtu against Kenanga Research’s assumption of 169.2 million mmbtu as well as higher CapCon.
Based on historical trends, the research arm expected a final net dividend per share (NDPS) amounting to 3.52 sen (based on its assumption of 75 per cent payout) to declare in May.
Meanwhile, the company’s cumulative FY17 earnings of RM194.6 million exceeded the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) and consensus expectations by a variance of more than 10 per cent.
Although MIDF Research was expecting stronger earnings in the second half (2H), the surge in earnings recorded were largely due to higher-thanexpected higher volume of gas sold and higher natural gas tariff.
MIDF Research believed that gas sales volume for FY17 registered strong year-over-year growth of more than eight per cent y-o-y but it was conservatively projecting growth of between six to 6.5 per cent.
“This is a direct result of strong gross domestic product (GDP) growth of 5.9 per cent recorded in 2017 compared with 4.2 per cent recorded a year earlier.”
Moving forward, growth in the gas sales volume will be primarily driven by the rubber, oleo-chemical, consumer products and glass manufacturing industry supported by robust 2018 GDP growth of approximately 5.5 per cent.
MIDF Research noted that the incentive-based regulation (IBR) framework is clearly having a positive impact on the group revenue and earnings as its regulated assets continue to increase.
“In addition, the IBR will provide financial neutrality to the company with respect with any gas costs fluctuations.
“Management guided that the increase in volume of gas sold and rise in new customers acquisition is likely to sustain throughout 2018.”
Given the anticipated strong gas sales volume in FY18 supported by robust GDP growth, MIDF Research revised its FY18 earnings forecast upward by 7.4 per cent.
The research arm has however maintained its conservative dividend payout forecasts.
Meanwhile, Kenanga Research believed that although Gas Malaysia has already almost fully utilised Petroliam Nasional Bhd’s (Petronas) guaranteed supply, the group should be able to secure additional supply from Petronas given that the Melaka regasification terminal (RGT) is under-utilised currently.
As such, the research arm still expected volume growth of three per cent and with higher contribution from combined heat and power (CHP), FY18 estimates were revised upwards by nine per cent to RM185.6 million, which was lower than FY17’s RM199.1 million as CapCon revenue is expected to soften.
“On the other hand, we introduce FY19 forecasts with earnings set to grow three per cent as we expect three per cent growth in sales volume,” Kenanga Research said.
This is a direct result of strong gross domestic product (GDP) growth of 5.9 per cent recorded in 2017 compared with 4.2 per cent recorded a year earlier. MIDF Research