Gas Malaysia’s final DPS of five sen a negative surprise
KUALA LUMPUR: Gas Malaysia Bhd’s (Gas Malaysia) final dividend per share (DPS) of five sen has represented a negative surprise for analysts.
In a filing on Bursa Malaysia, Gas Malaysia proposed a singletier final dividend of five sen per ordinary share in respect of the financial year ended December 31, 2017.
The research arm of Maybank Investment Bank Bhd (Maybank IB Research) expected a 100 per cent payout ratio, or a final DPS of circa seven sen.
This thus represented a negative surprise for Maybank IB Research.
“While this remains in accordance with Gas Malaysia’s dividend policy of a minimum 75 per cent payout ratio, we believe the investment community has come to expect a 100 per cent payout as Gas Malaysia has prior 2017, maintained such a practice since listing in 2012.
“With net profit likely to decline in 2018 due to the absence of pipeline contribution (circa RM25 million to RM30 million annually), we see this as an attempt by management to keep dividends stable,” it said.
For now, the research arm maintained its 100 per cent payout ratio assumption going forward, pending an update from management.
Maybank IB Research recalled that Gas Malaysia no longer runs on a predetermined spread under the incentive-based regulation (IBR) framework.
“The disclosure of segmental revenue and gas sales volume has allowed us to calculate Gas Malaysia’s implied gas spread.”
Maybank IB Research estimated Gas Malaysia’s 2017 spread at RM1.95 per mmBTU, significantly higher than the RM1.81 per mmBTU enjoyed in 2016.
The research arm’s forecasts presently assumed spreads of RM1.95 per mmBTU going forward.
Overall, Maybank IB Research viewed Gas Malaysia’s risk-reward as merely balanced currently.
“We see a low likelihood of positive earnings surprises, given the absence of pipeline contribution (circa RM25 million to RM 30 million annually) and possibly subdued volume growth (four per cent) as volume is coming from a high base.
“The deviation from its previous 100 per cent payout practice could potentially weigh down on near-term sentiment.”