Muted earnings growth ahead for PetGas – Analysts
KUCHING: Petronas Gas Bhd (PetGas) earnings growth is expected to remain muted, analysts observed, due to the lower transportation profit under the new RP1 framework.
Affin Hwang Investment Bank Bhd’s research arm (Affin Hwang) in a report, noted that PetGas has moved into the new RP1 (20202022) period with an effective lower allowable return.
It further pointed out that the regulated asset base on the return would gradually be moved from a depreciation replacement cost ( DRC) approach to net book value (NBV). The Energy Commission has not shared details on the WACC or the RAB size, but from its estimate, DRC is at least two to three-times the size of NBV due to aged assets.
“Based on our estimates, the migration of RAB in RP1 will have a seven to nine per cent negative impact on the transportation profit over the next three years.
“We have assumed profit contribution from gas processing to fall by four per cent, with a minor one per cent growth for the regasification segment,” the research team commented.
Aside from that, Affin Hwang noted that PetGas has plans to further branch out to provide more ancillary services.
“In 2019, the group introduced two new services including the gassing up and cooling down for LNG carriers and reloading services, both at RGT Pengerang.
“In 2020, the service will be extended to LNG bunkering services at RGT Sungai Udang and LNG truckloading services at RGT Pengerang. PTG has also invested in a nitrogen plant in Kertih which is expected to commence operations in 2021.
“We gather that the EPCC contract has been awarded to contractors with a contract sum of RM150 million,” it said.
All in, Affin Hwang maintained its ‘hold’ call on the stock.
It said: “No near-term catalyst in sight, but (PetGas) offers decent yield at above four per cent. This should help sustain current PE valuation, also trading near its long-term mean of 19-folds, which we deem fair.”