IBR framework a positive push for Gas Malaysia
Xin Hwa expects warehouses utilisation rate to hit 90 pct next month The IBR framework is clearly having a positive impact on the group revenue and earnings as its regulated assets continue to increase.
KUALA LUMPUR: Integrated logistics services provider, Xin Hwa Holdings Bhd, has secured new customers for its warehouses and expects the utilisation rate to hit 90 per cent next month from 70 per cent currently.
In a statement here yesterday, it said trade activities had been picking up from the third quarter 2016 which bode well for both its land transport and warehouse businesses.
Managing Director, Ng Aik KUALA LUMPUR: Gas Malaysia Bhd (Gas Malaysia) exceeded expectations for its third quarter of 2016 (3Q16) results as the incentivebased regulation (IBR) framework starts making a positive impact to the group’s revenue and earnings, analysts observed.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) pointed out that Gas Malaysia’s 3Q16 reported earnings rose by 28.2 per cent year-on-year (y-o-y) to RM43.2 million.
Excluding the impairments made on trade receivables of RM5.7 million, the group’s first nine months of 2016 (9M16) normalised earnings was RM107.9 million while cumulative normalised earnings exceeded expectations by a variance of more than more than five per cent.
It also highlighted that Gas Malaysia’s net profit margin for the quarter is the highest in two years.
“The IBR framework is clearly having a positive impact on the group revenue and earnings as its regulated assets continue to increase. In addition, the IBR will provide financial neutrality to the company with respect with any gas Chuan, said looking ahead, the company remained positive of its business prospects despite the challenging operating environment.
“Apart from the pick-up in cargo transportation activities, the group sees opportunities to provide logistics solutions for the various government-led infrastructure projects -- Klang Valley Mass Rapid Transit Line 2, Light Rail Transit Line 3 and Rapid Pengerang Project,” he costs fluctuations.
“Management guided that the increase in volume of gas sold and number of customers will sustain for in the second half of 2016 (2H16) into FY17,” MIDF Research said.
Of note, the IBR framework was implemented by Gas Malaysia starting January 1, 2016.
The research team further pointed out that Gas Malaysia’s 3Q16 revenue rose by 19.2 per cent said.
Ng said the company has proven track record and experience handling logistics for these kinds of projects.
He said the company was also doubling its warehousing space with the construction of new warehouse in Pasir Gudang and Shah Alam respectively.
“We would have close to one million square feet (sq ft) by end2017, up from 404,000 sq ft currently,” he said. — Bernama y-o-y, exceeding RM1.1 billion largely due to higher volume of gas sold and the upward revision of natural gas tariff.
“Despite the higher revenue, net margin for the quarter rose by 0.3 percentage points to four per cent from the preceding year,” it added.
MIDF Research said, “Given the better than anticipated gas volume sold, we raised our FY16 and FY17 earnings estimates by 10.3 and 5.3 per cent respectively.”
Meanwhile, AllianceDBS Research Sdn Bhd (AllianceDBS Research) pegged a more subdued outlook on Gas Malaysia given its susceptibility to Malaysia’s economic performance.
“We expect volume growth to remain subdued in view of the relatively weaker economic outlook, which may reduce the gas consumption of industrial players.
“We understand that gas supply from Petroliam Nasional Bhd (Petronas) is not a constraint given the low utilisation at the Melaka regasification terminal,” it opined.
The research team added, “We believe Gas Malaysia’s growth outlook remains subdued in the near term, in tandem with the moderation in the industrial sector.”
Overall, AllianceDBS Research maintained a ‘hold’ recommendation on the stock while MIDF Research maintained its ‘buy’ call on Gas Malaysia.