Petronas Dagangan - Not pumping enough
Target RM20.80 (Stock Rating: HOLD)
Although we expect a decent 4Q as year-end travel spurs petrol and jet fuel sales, PetDag's 9M14 net profit missed the mark, coming in at 69% of our full-year forecast and 66% of consensus due to lower sales volume. However, the interim DPS of 12 sen did not disappoint, being a robust 74% payout. Despite a rollover, our target price falls as we cut our FY14-16 EPS to reflect the lower sales volume. We now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E) as we scale back the target premium over our 16.3x target market P/E from 40% to 30% to reflect the current weak oil price sentiment. We maintain our Hold recommendation, preferring SapuraKencana and TH Heavy.
29% fall in 3Q14 net profit
PetDag's 3Q net profit dropped 29% yoy, mostly due to lower sales volume for selected products, mainly diesel and fuel oil. We think that another contributory factor was the price pressure on jet fuel due to the softening of oil price that started in 3Q. Unlike petrol, diesel and cooking gas, jet fuel does not give PetDag a fixed margin as it is not an automatic pricing mechanism (APM) product. The company commands around 70% of Malaysia's jet fuel market and remains the biggest jet fuel supplier to KLIA and KLIA2.
74% dividend payout ratio
PetDag made up for the net profit fall by announcing an interim DPS of 12 sen, translating into a payout ratio of 74% and bringing 9M DPS to 38 sen. With another quarter to go, the company looks set to exceed its payout policy of 50%. Dividends are paid quarterly.
Retail expansion continues
Despite the oil price downtrend, management is committed to defending its market share, which stands at an estimated 31% for retail, 68% for commercial, 57% for cooking gas and 24% for lubricants. PetDag started FY14 with 1,069 petrol stations and opened 16 stations in 1H. Management targets a total of 30 new stations this year. By year-end, the bulk of the company's RM500m annual capex (excluding RM200m set aside for operations in the Philippines, Vietnam and Thailand) will be spent on widening its domestic retail network.
Source: CIMB Daybreak - 05 November 2014
Target RM20.80 (Stock Rating: HOLD)
Although we expect a decent 4Q as year-end travel spurs petrol and jet fuel sales, PetDag's 9M14 net profit missed the mark, coming in at 69% of our full-year forecast and 66% of consensus due to lower sales volume. However, the interim DPS of 12 sen did not disappoint, being a robust 74% payout. Despite a rollover, our target price falls as we cut our FY14-16 EPS to reflect the lower sales volume. We now value the stock at 21.2x CY16 P/E (formerly 23.4x CY15 P/E) as we scale back the target premium over our 16.3x target market P/E from 40% to 30% to reflect the current weak oil price sentiment. We maintain our Hold recommendation, preferring SapuraKencana and TH Heavy.
29% fall in 3Q14 net profit
PetDag's 3Q net profit dropped 29% yoy, mostly due to lower sales volume for selected products, mainly diesel and fuel oil. We think that another contributory factor was the price pressure on jet fuel due to the softening of oil price that started in 3Q. Unlike petrol, diesel and cooking gas, jet fuel does not give PetDag a fixed margin as it is not an automatic pricing mechanism (APM) product. The company commands around 70% of Malaysia's jet fuel market and remains the biggest jet fuel supplier to KLIA and KLIA2.
74% dividend payout ratio
PetDag made up for the net profit fall by announcing an interim DPS of 12 sen, translating into a payout ratio of 74% and bringing 9M DPS to 38 sen. With another quarter to go, the company looks set to exceed its payout policy of 50%. Dividends are paid quarterly.
Retail expansion continues
Despite the oil price downtrend, management is committed to defending its market share, which stands at an estimated 31% for retail, 68% for commercial, 57% for cooking gas and 24% for lubricants. PetDag started FY14 with 1,069 petrol stations and opened 16 stations in 1H. Management targets a total of 30 new stations this year. By year-end, the bulk of the company's RM500m annual capex (excluding RM200m set aside for operations in the Philippines, Vietnam and Thailand) will be spent on widening its domestic retail network.
Source: CIMB Daybreak - 05 November 2014
