Gas Malaysia - No surprises in 4Q12 results

Period    4Q12

Actual vs. Expectations    The FY12 full-year results came in within our expectation but above that of the market consensus as the net profit of RM162.8m beat our estimates and the consensus by 4% and 9% respectively. 

Dividends   A final single-tier DPS of 7.69 sen has been declared in the quarter, bringing the YTD Net DPS to 12.69 sen vs. our projection of 12.5 sen. This implies a 100% payout of its FY12 earnings. 

Key Results Highlights   The 4Q12 net earnings rose 8% QoQ to RM45.5m from RM42.0m previously while there was a 2% rise in the revenue to RM552.0m from RM542.4m previously. The improvement in earnings was mainly attributable to the improved gas volume sales.

 On a YoY comparison, the 4Q12 net profit contracted by 28% from RM63.2m due to a reversal for an accrual of liability made in 4Q11. However, the 4Q12 revenue grew 4% from RM531.8m on a higher sales volume.  YTD, the 12M12 net profit declined 29% to RM162.8m from RM229.2m last year, although revenue rose 6% over the period. The sharp contraction in earnings was due mainly to the tariff revision effective earlier in 1 Jun 2011, which saw the profit margin spread cut by almost half to RM2.02/mmbtu from RM3.95/mmbtu previously.    

Outlook   The new 40MMScdf gas supply from the Melaka RGT in 2Q13 will be the earnings catalyst for the company, which will bring a c.10% increase in the gas supply.

 The subsequent 30MMScdf and 40MMScdf additional gas supplies from the same Melaka RGT in Jan 2014 and Jan 2015 respectively will ensure a consistent earnings growth post-2013.

Changes To Forecasts  No changes to our FY13E-FY14E forecasts.

Rating    MAINTAIN OUTPERFORM

 

Valuation    We continue to like GASMSIA for its earnings quality and generous dividend payout, which offer both growth and income attractions. We are maintaining our OUTPERFORM call on the stock with an unchanged price target of RM2.94/DCF share.   

Risks   Should the government decide to reduce the gas tariff, this will lead to a lower margin spread and in turn, negatively impact the company’s profitability as was seen previously in FY09.    

Source: Kenanga