PETGAS–Fundamental Analysis (10 Apr 2014)

PETGAS Analysis:-

Excel – http://1drv.ms/1kMTCF7

My View:-

– Fair value
  – 5Y DCF: 23.89 – 27.82 (MOS: 0% – 14%)
  – FY15 EY%: 17.13 – 20.17 (MOS: -18.38%)
– PETGAS is current fully valued. MOS for PETGAS should be 20%.
– Overall, the new GPTA will ensure that PETGAS will deliver sustainable, steady earnings and cashflow, while providing an incentive for the company to improve efficiency. Although there are major changes in various components of the GPTA, the impact on PETGAS’s earnings is largely neutral. PETGAS would receive a higher reservation charge (RC), based on the higher per unit charge of RM2,330/mmscf (from RM1,642/mmscf previously) but this is based on lower volume of 1,750 mmscfd (from 2,100 mmscfd previously). Furthermore, the flowrate charge for volumes above the 1,750 mmscfd threshold is now a lower RM0.20/GJ (from RM0.22/GJ previously). Its performance-based structure (PBS) for the additional sales of ethane, propane and butane has also been revised, which we estimate will result in lower revenue. PETGAS’s transportation charges have also been revised to a single levelised postage tariff for the entire Peninsular Malaysia, which would also result in lower revenue in FY14.
– On the other hand, PETGAS will be involved in the LNG RGT for the just approved RAPID project in Pengerang. Capacity of the RGT in RAPID will be similar to that of Melaka RGT, with c.80% capacity mainly catering to RAPID. Management expects the FID of this LNG RGT to be out in two months’ time. Assuming the refinery start-up is by early 2019, the RGT would possibly be ready by mid-2018. Thus, earnings contribution would only be seen from 2Q18 onwards.
– I believe that there will not be any significant movement in Petronas Gas’s share price in the near term.
– I will continue to hold PETGAS.

Latest Financial – Annual Report 2013 (9 Apr 2014) http://www.bursamalaysia.com/market/listed-companies/company-announcements/1589513

At the time of writing, I owned shares of PETGAS.

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