Summary
PETGAS’s 4QFY24 results came in within expectations. Quarterly CNP was flat qoq and yoy at RM439.8m, bringing the FY24 CNP to RM1.8bn (-2.9% yoy).
The Group declared a fourth interim dividend of 22.0sen in 4QFY24 (4QFY23: 22.0sen), bringing the YTD DPS to 72.0sen (FY23: 72.0sen).
Medium-term earnings growth will be supported by the upcoming RP3 and higher contributions from JVs, both expected from FY26 onwards.
After incorporating FY24 results, we adjust our FY25 and FY26 earnings forecasts by -0.2%.
Maintain HOLD recommendation with an unchanged TP of RM17.80, based on sum-of-parts valuation, and appraised with a three-star ESG rating.
Within Expectations. PETGAS’s FY24 core net profit (CNP) of RM1.8bn was in line with expectations, achieving 96% of both ours and consensus full-year forecasts.
Dividend Maintained. The Group declared a fourth interim dividend of 22.0sen in 4QFY24 (4QFY23: 22.0sen), bringing the YTD DPS to 72.0sen (FY23: 72.0sen).
YoY. Excluding extraordinary items such as forex losses (RM26.9m), net impairment losses on inventories (RM12.1m) and net gain on disposal of PPE (RM19.7m), 4QFY24 CNP remained flat at RM439.8m (-0.2% yoy). Operating profit declined across Gas Transportation (-3.4% yoy), Regasification (-15.1% yoy) and Utilities segment (-16.0% yoy) due to higher depreciation and maintenance costs. Meanwhile, share of profit from JVs and associates plunged 86.5% yoy, driven by earlier refinancing activity in 4QFY24 (additional costs of c.RM10m) to secure a lower interest rate for one of the JVs, as well as a one-off tax optimisation enjoyed by one of the JVs back in 4QFY23. These declines were offset by better performance in the Gas Processing segment (operating profit +6.6% yoy) supported by higher reservation charges under the third term GPA (effective 1 Jan 2024) and lower tax expenses on the back of one-off investment tax allowance (ITA) of c.RM40m for the Gas Processing Plant in Santong under the East Coast Economic Region initiative.
YTD. On a full-year basis, FY24 CNP dipped 2.9% yoy due to higher depreciation and maintenance costs, as well as lower share of profit from JVs and associates, as detailed above.
QoQ. CNP remained flat (-0.6% qoq). Despite lower internal gas consumption (IGC) and fuel gas costs, operating profit across all four segments dropped on the back of increased maintenance costs and depreciation expenses from newly completed capital projects, as well as lower revenue for the Utilities segment (-7.4% qoq) attributed to lower customer offtakes due to planned shutdowns. Share of profit from JVs and associates also plunged 76.7% qoq due to earlier refinancing activity. Fortunately, the declines were offset by one-off ITA mentioned above.
Outlook. Looking ahead, IGC and fuel gas costs are expected to decline in tandem with an anticipated drop in MRP, while maintenance costs should also decrease, as most maintenance activities are conducted in 4Q. As a result, 1QFY25 results are expected to improve qoq. Medium terms earnings growth will be supported by (i) the upcoming RP3 for Gas Transportation and Regasification segments from FY26 onwards, driven by higher regulated asset base (RAB) and increasing gas demand, and (ii) higher contributions from the JVs, particularly the 52MW Sipitang Power Plant and 100MW Kimanis Power Plant II, both expected to contribute from FY26 onwards. Notably, PETGAS recently received a Letter of Notification for a 120MW Power Plant in Labuan, demonstrating offtakers’ confidence in the Group’s capabilities.
Earnings Revision. After incorporating FY24 actual results, we adjust our FY25 and FY26 earnings forecasts by -0.2%. We also introduce FY27 earnings forecast of RM2.0bn.
Valuation and Recommendation. We maintain our HOLD recommendation with an unchanged TP of RM17.80, based on sum-of-parts valuation, and appraised with a three-star ESG rating. As a key player in Malaysia’s gas infrastructure, PETGAS stands to benefit from the country’s increasing natural gas demand. The Group remains a defensive stock of choice in a volatile market, with over 85% of its operating profit derived from stable, defensive segments, and offering an attractive dividend yield of c.4%.
Risks. Escalation in gas prices and unplanned shutdowns.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.390206 | 4.425718 |
| EUR | 5.008717 | 5.015095 |
| CNY | 0.603029 | 0.603828 |
| HKD | 0.565660 | 0.569770 |
| SGD | 3.345779 | 3.370205 |