PETGAS–Fundamental Analysis (11 May 2016)

Excel – Download the analysis file

Latest Financial – Q1 2016 Financial Report (9 May 2016)

FY15 Q4 Results Highlight:

  • PETGAS net profit decreased marginally by 0.6% YoY due to higher tax expenses of 8.3% (effective tax rate increased from 21.2% to 22.7%). Revenue increased by 2.7% YoY, primarily attributable from higher gas processing and regasification revenue. PBT margin drop slightly from 51.9% to 51.2% resulted from higher repair and maintenance cost.
  • Regasification of LNG posted the highest growth among PGB 4 core business activities. This segment grew by RM7.3m or 4.8% YoY due to higher storage fees attributed from the strengthening of USD against RM.
  • For the gas processing segment, segment revenue rose by +1.2%yoy to RM327.1m in-line with higher capacity booking from PETRONAS. Segment profit however remained flat at RM259.4m due to higher repair and maintenance costs. Segment margin contracted by -0.9ppts to 79.3%.
  • Although revenue for the Utilities segment rose by +1.4%yoy to RM252.9m, segment profit disappointed as 1Q16 profit sunk by -13.3%yoy to RM48.6m. The decrease in profitability is largely due to higher operating costs. Profit margin also contracted by -3.3ppts to 19.2%. Management guided that this is due to lower offtake by customers.

Valuation:

PETGAS-FY16Q1-Football-Field

In my opinion, fair value of PETGAS range from 23 to 24.5. Uncertainty risk of fair value is MEDIUM.

Going Forward:

The stock price movement of PetGas has been fairly resilient, trading sideways within the band of RM21-23 per share since mid-August 2014 despite the >-50% drop in global crude oil prices

Upside room of this stock is slightly limited due to a lack of fresh catalysts (the Pengerang regasification terminal will only come onstream at the end of the decade)

Valuations may not very compelling, but not bad. PETGAS still appeals to funds seeking earnings stability

I will continue to hold PETGAS, and may accumulate PETGAS in the future.

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

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