3QFY25 CNP was RM405.8m (-8.3% YoY, -9.2% QoQ), bringing 9MFY25 CNP to RM1.3bn (-4.5% YoY). This represents 71% of both our full-year forecast and consensus estimates. We view the results as below expectations, as we anticipate a softer 4Q due to the seasonal ramp-up in maintenance activities.
The Group declared a third interim dividend of 18.0sen in 3QFY25 (3QFY24: 18.0sen).
The QoQ and YoY decline in CNP was primarily driven by weaker Utilities contributions, impacted by the downward tariff revision effective July 2025, alongside higher depreciation and maintenance expenses.
No change to our earnings forecasts pending analyst briefing later today. Maintain HOLD recommendation with an unchanged TP of RM17.80, based on sum-of-parts valuation, and a three-star ESG rating.
Below Expectations. Excluding one-off electricity dispute settlement (-RM39.5m; assumed tax-deductible) and other adjustments (+RM1.0m), 3QFY25 core net profit (CNP) came in at RM405.8m (-8.3% YoY, -9.2% QoQ), bringing 9MFY25 CNP to RM1.3bn (-4.5% YoY). This represents 71% of both our full-year forecast and consensus estimates. We deem the results to be below expectations as we anticipate a weaker QoQ performance in 4Q due to the seasonal ramp-up in maintenance activities towards year-end.
Dividend Maintained. The Group declared a third interim dividend of 18.0 sen (3QFY24: 18.0 sen), bringing YTD DPS to 50.0 sen (9MFY24: 50.0 sen).
QoQ. 3QFY25 CNP fell 9.2%, dragged by softer contributions from the Utilities segment and higher tax expenses. Utilities operating profit declined 36.7%, reflecting margin compression following the downward tariff revision effective 1 July 2025. Evidently, segmental operating margin contracted by 6.3%-pts, partly due to higher depreciation and maintenance costs, despite revenue remaining largely flat (+1.2%). The effective tax rate also rose to 23.1% (2QFY25: 19.4%). Other segments were broadly stable.
YoY. CNP declined 8.3%, mainly due to weaker performance in Gas Transportation, Utilities and share of associates/JVs, which more than offset the improvement in Gas Processing. Gas Transportation operating profit fell 23.0% on reduced tariffs (effective 1 Jan 2025) and higher utilities and depreciation expenses. Utilities operating profit plunged 37.9% due to increased depreciation and maintenance activity. Share of associates/JVs contracted 33.3%. Conversely, Gas Processing operating profit improved 7.4% on lower operating expenses.
YTD. 9MFY25 CNP fell 4.5%, with Gas Transportation, Regasification and Utilities as the primary drags. Gas Transportation operating profit declined 19.5% due to tariff reductions, Putra Heights gas supply restoration costs, and higher depreciation and utilities. Regasification operating profit dipped 4.1% on higher maintenance expenses. Utilities operating profit dropped 11.8% following tariff reductions earlier in the year.
Outlook. We expect a softer QoQ performance in 4Q due to the seasonal increase in maintenance activities. PETGAS also faces a RM68m litigation claim (3.6% of FY25F core profit) related to the Putra Heights pipeline explosion. However, we do not anticipate any material near-term earnings impact, as the legal process is expected to be lengthy and could extend to the Federal Court before a final resolution. Medium terms earnings growth will be supported by (i) RP3 for Gas Transportation and Regasification segments (2026-2028), driven by higher regulated asset base and increasing gas demand, and (ii) stronger contributions from the JVs, particularly from Sipitang Power Plant (52MW), Kimanis Power (Dua) plant (100MW), and Labuan Power plant (120MW).
Earnings Revision. No changes to our forecasts pending further clarity from the analyst briefing later today.
Valuation and Recommendation. We maintain our HOLD recommendation with an unchanged TP of RM17.80, based on sum-of-parts (SOP) valuation, and a three-star ESG rating. Our TP implies 18.1x FY26F EPS, approximately 0.5 standard deviation above the 5-year historical mean forward PE. A potential catalyst would be the award of a new regasification terminal (RGT) contract, which would enhance earnings visibility. Notably, our valuation has yet to incorporate the proposed third RGT at Lumut (13MP), where PETGAS is a frontrunner given its track record at Sungai Udang and Pengerang. This could add c.RM2/share to our valuation assuming 500mmscfd capacity. 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%.
Risks. Escalation in gas prices and unplanned shutdowns.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.097077 | 4.130856 |
| EUR | 4.800240 | 4.806405 |
| CNY | 0.581645 | 0.582383 |
| HKD | 0.526592 | 0.530422 |
| SGD | 3.164464 | 3.187623 |