PETGAS (6033) : Petronas Gas - More gas coming
Target RM26.44 (Stock Rating: ADD)
We were pleasantly surprised that the Pengerang regasification terminal is expected to start soon, according to the conference call with PetGas yesterday. Once the terminal is completed in three years, PetGas's EBIT could be boosted by another 10-11%. We make no changes to our earnings forecasts and SOP-based target price of RM26.44. We remain optimistic on PetGas's earnings outlook, underpinned by its gas processing and transportation agreements which could see it continue to enjoy stable earnings and cashflow. We maintain our Add call on the stock. We expect the announcement of the Pengerang regasification terminal to act as a re-rating catalyst.
What Happened
PetGas hosted a conference call to discuss its recently released 3Q14 results. The conference call was hosted by its CEO, En. Yusa bin Hassan, while its Head of Finance, Puan Aida Aziza, was there to present on the quarterly financials. Around 20 analysts dialled in for the conference call. We were pleasantly surprised that the construction of the Pengerang regasification terminal is expected to start soon and should be completed in three years.
What We Think
As mentioned earlier, we were pleasantly surprised when PetGas’s management highlighted that it is likely to announce the project very soon. The project is expected to be completed in three years; thus it is likely to contribute to PetGas's earnings by FY18-19. The size of the plant would be similar to the existing Malacca regasification plant of 3.8m tonnes p.a., or 530mmscfd. 70-80% of this capacity will be specifically for the RAPID project. Assuming similar revenue and earnings contribution as well, we estimate that the new regasification terminal would contribute c.RM250m-300m p.a. in operating profit for PetGas, or 10-11% of its total EBIT.
What You Should Do
We think that investors should continue to accumulate PetGas. While we expect the Pengerang regasification terminal to be a re-rating catalyst, we also note that PetGas could start to pay dividends on a quarterly basis from now on, implying that downside for the stock is limited as it would provide investors with consistent returns throughout the year. Management is still keeping to its policy of a 70% dividend payout ratio.
Source: CIMB Daybreak - 06 November 2014
Target RM26.44 (Stock Rating: ADD)
We were pleasantly surprised that the Pengerang regasification terminal is expected to start soon, according to the conference call with PetGas yesterday. Once the terminal is completed in three years, PetGas's EBIT could be boosted by another 10-11%. We make no changes to our earnings forecasts and SOP-based target price of RM26.44. We remain optimistic on PetGas's earnings outlook, underpinned by its gas processing and transportation agreements which could see it continue to enjoy stable earnings and cashflow. We maintain our Add call on the stock. We expect the announcement of the Pengerang regasification terminal to act as a re-rating catalyst.
What Happened
PetGas hosted a conference call to discuss its recently released 3Q14 results. The conference call was hosted by its CEO, En. Yusa bin Hassan, while its Head of Finance, Puan Aida Aziza, was there to present on the quarterly financials. Around 20 analysts dialled in for the conference call. We were pleasantly surprised that the construction of the Pengerang regasification terminal is expected to start soon and should be completed in three years.
What We Think
As mentioned earlier, we were pleasantly surprised when PetGas’s management highlighted that it is likely to announce the project very soon. The project is expected to be completed in three years; thus it is likely to contribute to PetGas's earnings by FY18-19. The size of the plant would be similar to the existing Malacca regasification plant of 3.8m tonnes p.a., or 530mmscfd. 70-80% of this capacity will be specifically for the RAPID project. Assuming similar revenue and earnings contribution as well, we estimate that the new regasification terminal would contribute c.RM250m-300m p.a. in operating profit for PetGas, or 10-11% of its total EBIT.
What You Should Do
We think that investors should continue to accumulate PetGas. While we expect the Pengerang regasification terminal to be a re-rating catalyst, we also note that PetGas could start to pay dividends on a quarterly basis from now on, implying that downside for the stock is limited as it would provide investors with consistent returns throughout the year. Management is still keeping to its policy of a 70% dividend payout ratio.
Source: CIMB Daybreak - 06 November 2014
