PETGAS’s 1QFY25 CNP came in at RM465.7m (+5.9% qoq, -0.8% yoy), in line with expectations.
The Group declared a first interim dividend of 16.0sen in 1QFY25 (1QFY24: 16.0sen).
The slight yoy decline in CNP was affected by lower tariffs for the Transportation and Regasification segments, higher maintenance costs, and the purchase of liquid nitrogen to ensure supply continuity during the ASU shutdown.
The estimated profit impact from the Putra Heights pipeline fire incident is c.RM60m for FY25. We expect 2QFY25 results to decline qoq due to the repair and restoration costs.
No change to our earnings forecasts. Maintain HOLD recommendation with an unchanged TP of RM17.80, based on sum-of-parts valuation, and a three-star ESG rating.
Within Expectations. Excluding forex gain (-RM3.1m), PETGAS’s 1QFY25 core net profit (CNP) of RM465.7m was in line with expectations, accounting for 25% of our full-year forecast and 24% of consensus estimate.
Dividend Maintained. The Group declared a first interim dividend of 16.0sen in 1QFY25 (1QFY24: 16.0sen).
YoY. 1QFY25 CNP declined marginally by 0.8% yoy to RM465.7m. Operating profit fell across the Gas Transportation (-12.4% yoy), Regasification (-7.7% yoy), and Utilities (-7.5% yoy) segments. The Transportation and Regasification segments were affected by lower revenue driven by reduced tariffs effective 1 Jan 2025, as well as higher maintenance costs. Meanwhile, Utilities revenue was flat as the drop in industrial gas volume following the unplanned shutdown of Air Separation Unit (ASU) plant was offset by higher steam offtake. However, operating profit for the segment was impacted by the purchase of liquid nitrogen to maintain supply continuity during the ASU shutdown. These declines were offset by improved operating profit in the Gas Processing division (+5.9% yoy), driven by lower maintenance expenses, and higher share of profit from JVs and associates (more than doubled yoy) primarily due to reduced maintenance costs.
QoQ. CNP rose 5.9% qoq, supported by improved operating profit across all four segments and a higher share of profit from JVs and associates. The improvement in all four segments was driven by lower maintenance costs in 1QFY25, as most maintenance activities are typically undertaken in 4Q. The share of profit from JVs and associates nearly quadrupled qoq, benefiting from lower maintenance costs and an additional c.RM10m cost from proactive refinancing in 4QFY24 to secure a lower JV interest rate. These gains more than offset the higher tax expenses in 1QFY25, given that 4QFY24 had benefited from a one-off investment tax allowance of c.RM40m for the Gas Processing Plant in Santong.
Outlook. According to PETGAS, the estimated profit impact from the pipeline fire incident at Putra Heights, Puchong is c.RM60m for FY25 (representing 3.1% of our FY25 full-year estimated). This includes c.RM170m in repair and asset restoration costs, a significant portion of which is expected to be capitalised, with partial recovery anticipated through insurance claims. On top of that, revenue loss due to service interruption is estimated at c.RM20m. Looking ahead, IGC and fuel gas costs are expected to decline in tandem with an anticipated drop in MRP. Nonetheless, considering the repair and restoration costs, we expect 2QFY25 results to decline 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 and increasing gas demand, and (ii) higher contributions from the JVs, particularly the 52MW Sipitang Power Plant, the 100MW Kimanis Power (Dua) plant, and the 120MW Labuan Power plant.
Earnings Revision. No change to our forecasts.
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. Our TP implies a valuation of 18.9x FY25 EPS, more than 1.5 standard deviation above its 5-year historical mean forward PE. 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 pick in a volatile market, with over 85% of its operating profit derived from stable, defensive segments, while offering an attractive dividend yield of c.4%. A key catalyst would be the award of a new RGT contract, which would enhance long-term earnings visibility.
Risks. Escalation in gas prices and unplanned shutdowns.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212042 | 4.248408 |
| EUR | 4.921000 | 4.929487 |
| CNY | 0.591903 | 0.592919 |
| HKD | 0.540309 | 0.544492 |
| SGD | 3.268153 | 3.293573 |