AllianceDBS retains hold call on Petronas Dagangan

KUALA LUMPUR: AllianceDBS Research Sdn Bhd maintained its “hold” call on Petronas Dagangan Bhd (PetDag) with a price target of RM24.25 within a year.

PetDag registered a strong core earnings of RM323 million for its third quarter ended Sept 30, 2017 (3QFY17), which jumped 30 per cent, year-on-year (y-o-y), or 39 per cent quarter-to-quarter.

The group also declared a higher interim dividend of 20 sen (3QFY16: 14 sen).

“PetDag’s retail revenue improved 14 per cent y-o-y to RM3.4 billion, supported by a 19 per cent y-o-y increase in average selling price, in tandem with an increase in Mean of Platts Singapore (MOPS) prices,” it said.

The research firm, however, said PetDag’s earnings volatility may reduce, going forward.

“Despite fluctuations in oil prices, we believe that the group is poised to experience lower earnings volatility, going forward, due to weekly, rather than monthly, adjustment of retail selling prices since March 30, 2017, which allows for more timely pass on of oil price fluctuations.

“PetDag has a lower inventory period of 4-5 days at present compared with 9-10 days, previously, to mitigate inventory gains or losses,” said the company which was a leading mover in the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) component stocks this morning. — Bernama