Petdag to sustain dividend payout on sufficient cash reserves

PETALING JAYA: Petronas Dagangan Bhd’s (Petdag) scope for dividend payments is set to continue, considering that it has sufficient cash balance and reserves.

CGS-CIMB said in a report yesterday that Petdag’s board of directors had approved a five-sen interim dividend for the first quarter of this year despite suffering a net loss.

“Responding to a question from the ‘floor’ (during a conference call) regarding the prospects for dividends in the full year, Petdag managing director and chief executive officer Azrul Osman Rani noted that the dividends will be assessed on a quarterly basis by the board, but reminded investors that the company had paid dividends in excess of its minimum 50% payout for many years, even in the years with weak earnings.

“We forecast a 2020 dividend per share of 40 sen (169% payout), as Petdag may need to support the government’s Covid-19 fiscal spending via its parent, Petronas.

“It also has sufficient cash balances and reserves to pay more than its current year earnings per share.”

MIDF Research, meanwhile, said Petdag’s retail and commercial segment will likely contract further, given that the public is restricted from venturing outside their homes and flights remain grounded during the government’s movement control order (MCO).

“Recall that in the first quarter of 2020, the overall sales volume was down by 4% yearon-year (y-o-y) due to the implementation of the MCO in March.

“While the sales volume recorded was higher y-o-y in the month of January and February, these were not enough to overcome the loss in volume from the two weeks of the MCO.

“Hence, we estimate that overall volume will contract by about 5% in the second quarter of 2020, with some recovery expected in the month of May and June, as the government gradually eases the MCO and businesses resume operations in stages.”

To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18.

On May 4, a conditional MCO (CMCO) was enforced to allow businesses to re-open to recover the economy. The CMCO has been extended to June 9.

Petdag posted its first quarterly loss in 15 years on the back of declining petroleum product prices.

It posted a net loss of Rm29.42mil for the first quarter ended March 31, 2020 as compared to a net profit of Rm291.2mil in the previous corresponding period.

Revenue also came in lower by 16.04% y-o-y at Rm6.55bil.

With the lack of guidance and non-disclosure of volume breakdowns, UOB Kay Hian said it is taking a more conservative stance and expects a 22% group-wide volume contraction in 2020 for Petdag.

“Our base case assumes sustained recovery only from the fourth quarter, leading to 10% or more growth for 2021 volumes to recover back to 2017 and 2018 levels,” it said.