Petronas Gas’ 9MFY17 earnings, dividends in line with expectations

KUCHING: Petronas Gas Bhd’s ( Petronas Gas) first nine months of financial year 2017 (9MFY17) earnings have come in line with analysts’ expectations, as has the group’s dividend per share ( DPS).

In a filing on Bursa Malaysia, Petronas Gas announced that for the period ended September 30, 2017, profit increased by RM33.7 million or 2.6 per cent to RM1.306 billion.

Petronas Gas’ 9MFY17 net profit of RM1.306 billion was within AmInvestment Bank Bhd’s (AmInvestment Bank) expectations, accounting for 73 per cent of the research firm’s FY17F earnings and 74 per cent of street’s RM1.772 billion, similar to the proportion of 9MFY16 to FY16.

AmInvestment Bank noted that the group’s 9MFY17 DPS of 50 sen was also in line with the research f irm’s forecast.

For the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research), Petronas Gas’ 9MFY17 cumulat ive earnings also came in on target, making up 71.3 per cent and 73.7 per cent of its and consensus full year FY17 earnings estimates.

According to AmInvestment Bank, Petronas Gas’ next phase of growth will stem from the group’s liquefied natural gas ( LNG) regasi f icat ion terminal ( RGT) in Pengerang, as its 490 million standard cubic feet per day (mmscfd) capacity recent ly started c omme r c i a l op e r at ion progressively on November 1, 2017, which the research firm had already incorporated RM300 million annually to the group’s earnings before interest and tax ( EBIT) from FY18F onwards.

However, the research firm highlighted that its FY18FFY19F return on regulated asset base of 15 per cent for the gas transportation segment is higher than Tenaga Nasional Bhd’s 5.4 per cent return on assets ( ROA) in FY17, as management is working with the authorities to minimise the impact to Pet ronas Gas ’ busines s operations.

“Based on management’s g uidanc e that it s gas transportat ion segment ’ s depreciated replacement cost is three- fold its current historical book value and assuming that transportation ROAs could drop all the way to eight per cent under the new third- party access tariff, Petronas Gas’ FY18F- FY19F revenue could fall further by nine per cent,” AmInvestment Bank said. “This translates to an additional net profit drop of 24 per cent.”

As such, AmInvestment Bank maintained Petronas Gas’ FY17F- FY19F earnings as the group’s 9MFY17 net pr o f i t was wi thin expectations.

AmI nve s tment Ba n k ma i n t a i n e d it s ‘sell’ recommendation for Petronas Gas with a fair value of RM16.60 per share.

“This is due to the expected value erosion from the Energy Commission’s plan to implement Incentive- Based Regulation ( IBR) tariffs on the group’s gas transportation tariff under the Gas Supply Act 2016, expected to be effective January 16, 2018,” it said.

Me a nwh i l e , M I DF Research al so made no changes to earnings forecasts.

However, the research arm upgraded its stance on Petronas Gas to ‘ buy’ with an unchanged target price of RM20.00 per share as it was of the opinion that the company will continue to perform.

This was premised on strong and diversified income stream, expected strong national gross domestic product (GDP) of 5.1 per cent and 5.5 per cent for FY17 and FY18 respectively, and strong potential capital upside.