PETGAS (6033) : Petronas Gas - Pengerang to drive excitement
Target RM27.11 (Stock Rating: ADD)
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.
What Happened
PetGas hosted a conference call to discuss its recent announcement regarding the LNG regasification terminal and air separation unit projects in Pengerang, Johor. The conference call was hosted by its CEO, En. Yusa bin Hassan, while its head of finance, Puan Aida Aziza, was there to present the quarterly financials. Around 20 analysts dialled in for the conference call. Key takeaways from the briefing: 1) The regasification terminal in Pengerang is expected to cost a total of RM2.7bn. RM1.5bn of the cost is for the engineering, procurement, construction and commissioning (EPCC). 2) The Pengerang regasification terminal is expected to have the same capacity as the existing regasification terminal in Malacca, i.e. 3.5mt p.a. 3) Aside from the regasification terminal in Pengerang, PetGas is also involved in another piece of key infrastructure for the PIC, the air separation unit (ASU), for which the final investment decision (FID) is still pending.
What We Think
We had previously highlighted that the regasification terminal is estimated to contribute c.6-8% of PetGas' earnings in FY18. We are positive on PetGas's involvement in these infrastructure projects for the PIC as it adds more assets that will generate stable and secure earnings and cashflow. While it is uncertain how much the ASU will contribute to PetGas's earnings once it is completed (assuming it goes through) by 4Q18, we believe that the development cost for the plant would likely be in the region of RM800m-1bn based on other similar projects globally.
What You Should Do
We maintain our Add call on the stock, with an unchanged target price of RM27.11. We think the FID for the ASU will be the next re-rating catalyst for the stock, which we expect to be made sometime in 2Q-3Q of 2015.
Source: CIMB Daybreak - 25 November 2014
Target RM27.11 (Stock Rating: ADD)
Axiata’s 3Q14 core net profit fell 15.2% qoq (-35.4% yoy). This missed our expectations, with 9M14 core net profit at 66%/69% of our/consensus full-year forecast. As expected, no dividends were declared for 3Q14. We cut our FY14-16 core net profit by 8-13% for weaker-than-expected Celcom and associate earnings, plus much higher depreciation. Our SOP-based target price is cut by 1.4% to RM7.10. With rebounds expected at Celcom and XL, we see stronger earnings for Axiata in FY15; though consensus numbers appear to have factored this in. Axiata is now guiding for steady to marginally higher capex in FY15, which is possibly a negative surprise for the market. Still, Axiata is our preferred Malaysian telco pick for its earnings recovery story.
What Happened
PetGas hosted a conference call to discuss its recent announcement regarding the LNG regasification terminal and air separation unit projects in Pengerang, Johor. The conference call was hosted by its CEO, En. Yusa bin Hassan, while its head of finance, Puan Aida Aziza, was there to present the quarterly financials. Around 20 analysts dialled in for the conference call. Key takeaways from the briefing: 1) The regasification terminal in Pengerang is expected to cost a total of RM2.7bn. RM1.5bn of the cost is for the engineering, procurement, construction and commissioning (EPCC). 2) The Pengerang regasification terminal is expected to have the same capacity as the existing regasification terminal in Malacca, i.e. 3.5mt p.a. 3) Aside from the regasification terminal in Pengerang, PetGas is also involved in another piece of key infrastructure for the PIC, the air separation unit (ASU), for which the final investment decision (FID) is still pending.
What We Think
We had previously highlighted that the regasification terminal is estimated to contribute c.6-8% of PetGas' earnings in FY18. We are positive on PetGas's involvement in these infrastructure projects for the PIC as it adds more assets that will generate stable and secure earnings and cashflow. While it is uncertain how much the ASU will contribute to PetGas's earnings once it is completed (assuming it goes through) by 4Q18, we believe that the development cost for the plant would likely be in the region of RM800m-1bn based on other similar projects globally.
What You Should Do
We maintain our Add call on the stock, with an unchanged target price of RM27.11. We think the FID for the ASU will be the next re-rating catalyst for the stock, which we expect to be made sometime in 2Q-3Q of 2015.
Source: CIMB Daybreak - 25 November 2014
