- We maintain our BUY recommendation on Petronas Gas (PGas)
with an unchanged sum-ofparts- (SOP) based fair value of RM17.62/share,
implying an FY12F PE of 23x. But we are likely to raise our valuation as the
group will benefit from the multiple gas and power projects in the pipeline.
- The Edge Financial Daily reported PGas’ managing
director/chief executive officer as saying that the group is on track to
complete its Lahad Datu liquefied natural gas (LNG) terminal in 2015. The
terminal, which will cost RM1bil, will convert LNG into gas for an adjacent
300MW electricity generation plant, which will be owned by Tenaga Nasional.
- PGas plans to call for tenders for the initial 10
facilities by September this year, with bids for the remaining facilities to be
opened by early 2013. The facility will have a capacity of 100 million metric
standard cu ft per day (mmscfd).
- Newspapers also reported that the front-end engineering
and design services contract was awarded to US-based engineering services
provider Fluor Corp.
- Assuming a project IRR of 12% and weighted average cost of
capital of 6%, we estimate that this Lahad Datu regassification terminal
project could enhance PGas’ DCF by 2%.
- Besides this Lahad Datu project, there are other
regassification terminals in the pipeline such as in Pengerang and possibly in
Lumut. In Pengerang’s Refinery and Petrochemical Integrated Development
(RAPID), the power plant is likely to be owned by PGas. Recall that PGas has centralised
utilities facilities in Kerteh, which produce electricity, as well as a 60%
stake in the 300MW gas-fired Kimanis power plant, expected to be completed by
the end of 2013.
- We remain positive on PGas due to:- (1) Approaching
earnings inflection point when the completion of the Lekas re-gassification
plant by August this year boosts Peninsular Malaysia’s natural gas capacity by
25%; (2) Global shift from nuclear to natural gas for power generation;
(3) Government’s strategy to gradually
remove natural gas subsidies by 2015, which will lead to a more viable pricing
mechanism for electricity generation; (4)
Multiple domestic regassification projects, and (5) Expanding power generation ventures.
- The stock is currently trading at a fair FY12F PE of 22x,
at parity to its 2009 peak. But we expect further newsflow on LNG projects to
further catalyse the stock’s re-rating process.
Source: AmeSecurities
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