Thursday 10 May 2012

Petronas Gas - Steady earnings poised for Lekas step-up BUY


- We maintain our BUY recommendation on Petronas Gas (PGas) with an unchanged sum-of-parts- (SOP) based  fair value of RM17.62/share, implying an FY12F PE of 23x.

- We maintain PGas’ FY12F-FY14F earnings as its 1QFY12 net profit of RM333mil was largely within expectations  – accounting for 22% of our FY12 forecast of RM1,516mil and 22% of street estimates’ RM1,537mil. Hence, we maintain FY12F-FY14F net profits, which have incorporated contributions from the upcoming Lekas liquefied natural gas (LNG) regassification terminal in Malacca, which is expected to commence in September this year.

- QoQ, the group’s 1QFY12 turnover slid 1% to RM915mil largely due to lower export of propane and butane, partly offset by higher revenue from higher transportation capacity charge and increased sales of utilities. But 1QFY12 net profit slid 3% QoQ largely due to an unrealised loss from  the revaluation of the group’s JPY16bil (RM454mil) Samurai bond. 

- YoY, the group’s 1QFY12 net profit rose 3%, driven by higher sales of industrial gasses, electricity and steam from the utilities division. But net profit surged 25% YoY due to the absence of impairment loss and lower repair and maintenance costs.

- As highlighted in the previous quarterly results, there was no significantly adverse earnings impact from the natural gas shortfalls from Petronas’ ongoing plant maintenance programme and supply disruptions as the transportation fee is essentially a fixed-capacity reservation charge. 

- 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 viablepricing mechanism for electricity generation; 

(4)  Multiple domestic regassification projects, and 

(5)  Expanding power generation ventures.

- The stock is currently trading at an attractive FY12F PE of 21x – below its 2009 peak of 23x. We expect further news flow on fresh LNG projects to further catalyse the stock’s rerating process.

Source: AmeSecurities

No comments:

Post a Comment