PETDAG (5681) : Petronas Dagangan - Retail drive continues
Target RM20.80 (Stock Rating: HOLD)
PetDag's management is confident in meeting its target to open 30 new stations by year-end, we heard at its post-results briefing. Management also reiterated its dividend commitment as the company is likely to exceed its 50% dividend payout policy this year. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x. We maintain our Hold recommendation, preferring SapuraKencana among the big caps and TH Heavy among the small caps.
What Happened
Around 30 analysts and fund managers attended PetDag's 3Q briefing following its results announcement on 4 Nov. There were no surprises from the briefing. Management will continue to place emphasis on high-margin products, lubricant and jet fuel in particular, while ramping up the opening of 14 petrol stations by year-end, taking the number of new stations to 30 this year, to become a leader in the retail segment in two years. Contributions from regional units in the Philippines, Vietnam and Thailand continued to flow through, although they chipped in less than 5% of the company's net profit. See more briefing highlights overleaf.
What We Think
We are encouraged that management is confident in meeting its target of opening 30 new stations, bringing the number of new stations to 1,099 by year-end. The stations generate income not only from the pumps, but also from Mesra convenience stores and cross-selling activities for lubricant products, which offer the highest margins despite being the smallest revenue contributors. In fact, the star performer in 9M was the non-traditional lubricant segment, which revved up solid sales volume growth of 7% yoy to 48.3m litres, thanks to increased high-street trades and a higher offtake from Perodua. PetDag announced an interim DPS of 12 sen for 3Q, translating into a payout ratio of 74% (76% in 1Q and 75% in 2Q) and bringing 9M DPS to 38 sen. At the briefing, management reiterated its commitment to rewarding shareholders with consistent dividends. With another quarter to go, the company looks set to exceed its payout policy of 50%. Dividends are paid quarterly.
What You Should Do
We advise investors to hold on to their PetDag shares as the company lays the foundation for future growth and continues to focus on becoming the all-round domestic leader in two years.
Source: CIMB Daybreak - 07 November 2014
Target RM20.80 (Stock Rating: HOLD)
PetDag's management is confident in meeting its target to open 30 new stations by year-end, we heard at its post-results briefing. Management also reiterated its dividend commitment as the company is likely to exceed its 50% dividend payout policy this year. We continue to value the stock at 21.2x CY16 P/E, still at a 30% premium over our target market P/E of 16.3x. We maintain our Hold recommendation, preferring SapuraKencana among the big caps and TH Heavy among the small caps.
What Happened
Around 30 analysts and fund managers attended PetDag's 3Q briefing following its results announcement on 4 Nov. There were no surprises from the briefing. Management will continue to place emphasis on high-margin products, lubricant and jet fuel in particular, while ramping up the opening of 14 petrol stations by year-end, taking the number of new stations to 30 this year, to become a leader in the retail segment in two years. Contributions from regional units in the Philippines, Vietnam and Thailand continued to flow through, although they chipped in less than 5% of the company's net profit. See more briefing highlights overleaf.
What We Think
We are encouraged that management is confident in meeting its target of opening 30 new stations, bringing the number of new stations to 1,099 by year-end. The stations generate income not only from the pumps, but also from Mesra convenience stores and cross-selling activities for lubricant products, which offer the highest margins despite being the smallest revenue contributors. In fact, the star performer in 9M was the non-traditional lubricant segment, which revved up solid sales volume growth of 7% yoy to 48.3m litres, thanks to increased high-street trades and a higher offtake from Perodua. PetDag announced an interim DPS of 12 sen for 3Q, translating into a payout ratio of 74% (76% in 1Q and 75% in 2Q) and bringing 9M DPS to 38 sen. At the briefing, management reiterated its commitment to rewarding shareholders with consistent dividends. With another quarter to go, the company looks set to exceed its payout policy of 50%. Dividends are paid quarterly.
What You Should Do
We advise investors to hold on to their PetDag shares as the company lays the foundation for future growth and continues to focus on becoming the all-round domestic leader in two years.
Source: CIMB Daybreak - 07 November 2014
