Petronas Gas - A strong 2014
Target RM27.11 (Stock Rating: ADD)
PetGas's 4Q14 core net profit of
RM543.8m brought its full-year core net profit to RM1.815bn, which was
above our expectations at 107% and 104% of our and consensus estimates,
respectively. The key variance was the higher-than-expected profit from
its JV. Nonetheless, we maintain our FY15-16 earnings
forecasts pending any new information from its conference call later
today. FY2014 core net profit grew 25.7% yoy, underpinned by higher
transportation, utilities and regasification revenues. Our SOP-based
target price is unchanged at RM27.11. We maintain our Add call on the
stock. PetGas remains our top pick for the overall utilities sector
given its stable earnings and cashflow outlook.
4Q14 results review
4Q14 revenues grew by 8.1% yoy, driven by increased utilities revenues and higher gas transportation and processing
revenues under the new agreement. Utilities revenues grew by 24% yoy
due to higher offtake by its customers and the tariff hike, which took
effect on Jan 2014. Its transportation and processing revenues grew by
3.8% and 8.9%, respectively, mainly due to the revised agreement that
came into effect on May 2014. Earnings for the quarter grew to RM571m,
although, after stripping out deferred tax assets
of RM27m, brought 4Q14 core net profit to RM543.8m, up by 38% yoy. For
the full year, PetGas’s core net profit grew by 25.7% yoy, with key
drivers being higher transportation, utilities and regasification
revenues. PetGas announced a third interim dividend of 15 sen which
brings its YTD DPS to 55 sen, in line with our estimates.
No impact from falling gas prices
While the drop in crude oil
prices has also resulted in falling LNG prices, we note that PetGas is
unaffected as it carries no feedstock risk given that the gas it
processes and transports is owned by Petronas. As such, we do not see
any downside risk to its earnings arising from falling LNG prices.
Regasification terminal still on
In Dec 2014, Petronas announced that it was
cutting its capex spending by 15-20% in 2015. However, PetGas's new
regasification terminal in the RAPID complex is unaffected as the whole
project has already reached a final investment decision (FID) and will
thus go on as planned. The regasification terminal is expected to start
construction by 2Q15.
