Another record aided quarter for Gas M’sia, aided by high gas prices

KUCHING: Gas Malaysia Bhd (Gas Malaysia) performed better-thanexpected for the first quarter of the financial year 2022 (1QFY22), aided by better deal in contract renegotiation coupled with higher retail market as gas price spiked, analysts observed.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) pointed out that Gas Malaysia’s recorded a strong set of 1QFY22 results which saw profit jumping 28 per cent quarter-on-quarter (q-o-q) despite the market liberalisation which started from January 2022.

“1QFY22 core profit grew another 28 per cent quarter-on-quarter (qo-q) to RM91.3 million from RM71.5 million in 4QFY21 thanks largely to higher-than-expected margin spread from GMES

where its earnings accounted for 40 per cent from 30 to 35 per cent previously owing to improved margin from newly renegotiated contracts where tariff setting strategy set for pricing to be determined by tenure of contract (three, five and eight years) and volume signed, as well as rising gas price lifting retail margin which is a function of percentage based on gas cost.

“On the other hand, GMD’s volume measurement was also changed to Reserved Firm Capacity (RFC); booking volume in GJ term as compared to actual volume transmitted which was measured in mmbtu,” it said.

It further pointed out that given that the change in volume measurement and demand volume is sensitive information in the market liberalisation environment, Gas Malaysia is no longer sharing gas volume data.

“Based on the earnings mix, a lower contribution mix from GMD could mean a lower sales volume. In addition, GMES lost 21 customers in 1QFY22 with a total of 15 new customers. However, with new contract tenure, Gas Malaysia could at least lock in its customers for minimum three years,” Kenanga Research said.

Aside from that, the research team highlighted that the new tariff setting strategy seems working.

“While the market liberalisation started in January this year had put off buying interest previously, we are pleased to see its new tariff setting strategy addressing the earnings risk, at least the 1QFY22 results showed that it worked.

“This is despite Gas Malaysia losing six customers net, but it still produced commendable results.

“With RFC in place, all shippers have to ‘take-or-pay’ their booked volume, hence volume growth may not be the only earnings determinator while GMES margin, both profit margin and retail margin, will also be important contributors as witnessed in 1QFY22 results.