PetDag hit by travel restrictions, implementation of MCO
KUALA LUMPUR: Petronas Dagangan Bhd’s (PetDag) financial year 2020 (FY20) performance was affected by measures implemented to curb the spread of the Covid19 pandemic, which includes travel restrictions and the implementation of the movement control order (MCO).
In a filing on Bursa Malaysia, PetDag said its revenue for the year decreased by RM11,582.7 million as total sales volume declined by 23 per cent while average selling prices declined by 20 per cent. It also reported that it recorded a lower profit before tax (PBT) at RM742.5 million or a 66 per cent decline mainly due to a decline in gross profit following lower sales volume and a sharp decline in MOPS prices at the beginning of the year.
In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) pointed out that PetDag’s FY20 earnings declined tremendously amidst the Covid-19 pandemic and travel restrictions, resulting in poorer sales volumes and product prices.
“Following the re-imposition of MCO in January 2021 with stricter travel restrictions, we foresee the upcoming 1QFY21 quarter to be also another badly hit quarter.
“Nonetheless, as more economic activities are allowed to operate during this second MCO re-imposition (as compared to the MCO last year), we expect sales volumes to be less dire comparatively this time,” it opined.
Meanwhile, the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) said in light of the recent reimplementation of the MCO, it reduced its FY21F earnings by eight per cent to RM670.8 million (from RM729.2 million previously).
“This is as we opine that its sales volume will be impacted in 1QFY21. That said, we do think its revenue during the quarter will be cushioned by the increase in oil price recently which has reached above US$60 per barrel,” it added.
All things considered; MIDF Research said it retained its ‘neutral’ recommendation on PetDag for now pending its analyst briefing.
“We made no changes to our recommendation at this juncture given that we are expecting the current enforcement of MCO to impact PetDag’s profitability in the first quarter of FY21 given that sales volume is expected to drop during the period.
“That said, the recent uptrend movement in oil price might be able to partially cushion the impact from the drop in sales volume. Furthermore, we continue to view PetDag positively given its ongoing effort in mitigating the impact from volatility in selling prices and lower sales volume via increasing pump productivity, aggressive marketing and product promotions, and creating brand stickiness via SETEL mobile application,” it said.
Kenanga Research maintained its ‘underperform’ rating on the stock.