Better 3Q for Petronas Gas on stable segment earnings
KUCHING: Petronas Gas Bhd (Petronas Gas) experienced better sequential third quarter of its financial year 2022 (3QFY22) with core profit rising by eight per cent to RM482.2 million on the back of a four per cent hike in revenue.
While fuel gas price remained high, its utilities unit managed to register higher operating profit by 65 per cent to RM53.5 million, with 13 per cent higher revenue (on higher product price), thanks largely to the favourable impact from contract renewals.
Meanwhile, earnings for regulated businesses - gas processing (GP), gas transportation (GT) and regassification terminals (RGT) -were fairly flattish, said analysts with Kenanga Investment Bank Bhd (Kenanga Research).
“Generally, Petronas Gas saw weaker year on year (y-o-y) earnings on higher fuel costs,” it said in its notes yesterday.
“Despite higher revenue by nine per cent, its first nine months (9MFY22) core profit fell 15 per cent to RM1.35 billion owing to higher gas fuel cost that hit utilities), as well as higher internal gas consumption cost (in-line with gas fuel cost) for GT and RGT which saw their operating profits falling eight and 10 per cents, respectively.
“The improved topline was driven by utilities (38 per cent on higher product price in tandem with higher gas price) and GP (two per cent on higher internal gas consumption incentive achieved).”
While the gas transportation and regasification segments should remain stable in FY22 with the continuation of the Regulatory Period 1 (RP1), the team at RHB Investment Bank Bhd (RHB Research) said the outcome of RP2 will likely be known in the near term.
“Note that we have assumed the gas transportation tariff will be further reduced in RP2,” it added.
It saw that Petronas Gas' utilities margin is under pressure due to high fuel gas prices, which is a non-pass-through cost for electricity sales. That said, RHB Research expect the utilities division's margin to recover further in 4Q22 following the renewal of several long-term contracts.
“The potential third LNG storage tank at Pengerang is on track for final investment decision by end-FY22. This project is regarded as a nonregulated business and, as such, it would not be tabulated in the upcoming RP2."
In view of the declining risk impact of Covid-19, MIDF Amanah Investment Bank Bhd (MIDF Research) believed a hike in demand for gas and utilities is expected in the near term.
“Petronas Gas anticipates that as the economy recovers, asset utilisation will increase as well,” it recapped. “Long-term contracts are also expected to support consistent income streams – notably for the GP, GT and RGT segments.
"During the reporting quarter, the group renewed a number of long-term Utilities contracts which helped offset the negative effects of rising fuel gas prices.
“However, we opine that its performance until the end-year will continue to be impacted by the rising Malaysian reference price, and volatility of the ringgit against US dollar.”