Sustainable earnings in FY20 for Petronas Gas
KUALA LUMPUR: Petronas Gas Bhd’s (Petronas Gas) net profit for the fourth quarter of financial year 2020 (4QFY20) came in at RM503 million, bringing its FY20 cumulative earnings to RM2.16 billion which was above consensus’ full-year earnings estimates at 116 per cent.
This was in-line with the higher tariff in its Regulatory Period 1 (RP1) which was then offset by lower electricity offtake, commented analysts with MIDF Amanah Investment Bank Bhd (MIDF Research).
Meanwhile, earnings increased by 6.2 per cent year on year (y-o-y) as a result of better revenue contribution from gas processing, regasification and utilities segments during the quarter and; higher share of profits from joint ventures.
“On a quarterly basis, revenue was rather flat whilst earnings declined by 14.9 per cent respectively – primarily attributable to higher internal gas consumption; higher repair and maintenance costs as well as unfavourable foreign exchange rate during the quarter,” the research team said.
During the quarter, Petronas Gas registered higher earnings year-over-year during the quarter; largely attributable due to excellent plant and operational performance and reliability, lower operating and depreciation costs from Gas Processing segment and higher revenue from gas transportation and regasification following better tariff under RP1.
Meanwhile, its gas processing segment revenue was flat yearover-year at RM423.7 million during the quarter whilst the segment results increased by nine per cent y-o-y to RM224.8 millino following lower internal gas consumption (IGC) incentive due to revision in pricing from regulated price to reference market price.
That said, segment results were better year-over-year from lower depreciation expense and extension of statutory plant turnaround interval.
As for gas transportation, revenue was higher by six per cent y-o-y during the quarter whilst profit declined by 5.5 per cent y-o-y. This was primarily due to the impact from the lower regulated asset base (RAB).
This was offset by lower internal gas consumption and other operational expenses. Gas transmission reliability was at 100 per cent.
Petronas Gas’s utilities segment revenue was lower by 10.3 per cent y-o-y largely due to lower excess electricity offtake by customers recorded during the quarter.
That said, the segment’s revenue jumped by 67.7 per cent y-o-y following higher contribution from steam and industrial gases sales coupled with lower depreciation expense and fuel gas costs – which helped to boost profit during the quarter.
Regasification’s revenue and profit grew by 12.9 and 16.9 per cents y-o-y to RM354.4 millionm and RM164.1 million respectively during the quarter arising from the higher tariff implemented under the Regulatory Period 1 at RM3.455 per GJ for its Regasification Terminal Sungai Udang, Melaka and RM3.458 per GJ for its Regasification Terminal in Pengerang, Johor respectively which started in January 2020.
“We remain sanguine on the prospect of Petronas Gas and its earnings trajectory which is expected to be sustained by increasing contribution from its regulated business segments – from the higher RP1 tariffs and lower internal gas consumption (IGC).
PetGas earnings going forward will also be supported by among others lower depreciation costs (from lower regulated asset base) and increasing ancillary income.
Going forward we are of the opinion that the company will continue to perform premised on strong and stable income stream; growing contribution from its ancillary business which will support core earnings and; improved revenue recognition from gas transportation and regasification following the better tariff for RP1.