Mild step-down of Petronas Gas’ profit in RP1

KUALA LUMPUR 7 July - Primarily due to pandemic outbreak of COVID-19, Petronas Gas (PTG) profit seen to contract in Regulatory Period 1 (RP1:2020-2022), Maybank Investment Bank Research (Maybank IB) forecasted.

In the near term, PTG’s profitability is largely sheltered from the effects of Movement Control Order (MCO), with only the utilities segment (c.6% of EBIT) possibly exposed through lower electricity sales. 

“We thus expect PTG’s earnings to remain relatively stable throughout RP1.

“Longer term, given the scheduled step-down of the transport RAB, we expect further declines in PTG’s transport tariffs in 2023 and 2026 respectively,” said Maybank IB in a report. 

PTG had a good run by reflecting its relatively stable first quarter 2020 results (RM467 million core net profit, +2% YoY and -2% QoQ).

“The prevailing profitability concerns then thus appeared overdone in our view, leading us to upgrade PTG to BUY on 21 May 2020,” said Maybank IB.

Share price of PTG has since gained up to 10% in the absence of any material operational developments. 

With no near-term catalysts in sight,  Maybank IB downgraded PTG to Hold on its market price from BUY with an unchanged discounted cash flow (DCF)-derived at RM17.20.

To recap, PTG is the gas infrastructure arm of national oil company Petronas.

PTG in its financial year 2019 revenue recorded RM5,458 million and expected to surge at RM5,501 million in revenue this year. - DagangNews.com