• Maintain BUY (TP: RM25.40). Petronas Dagangan (PetDag) FY23 core PATAMI of RM909mn (+22% YoY) slightly trailed both our and consensus’ expectation at 89% respectively. 4Q23 core earnings were flattish QoQ at RM167mn mainly due to higher effective tax. The sales volume were sustained at 4.2bn litres. The company declared a 4th interim DPS of 27sen which is higher than 4Q22 DPS of 26sen, bringing total DPS for FY23 at 80sen (FY22: 76sen). Maintain PetDag as a BUY with unchanged DCF-derived TP of RM25.40. While the subsidy rationalisation plan posed key downside risk to our earnings forecast, we keep it unchanged at this juncture amidst uncertainties on the mechanism.

• Key highlights. 4Q23 PBT rose 9.2% QoQ and 18.3% YoY to RM286mn mainly due to higher GP from Jet A1 and diesel fuel. Sales volume maintained at record high at c.4.2bn litres driven by stronger demand for mogas and diesel as well as increase in flight frequency. Convenience segment suffered higher losses at RM15.6mn (4Q22: loss of RM7mn). the company paid 80sen DPS for full year 2023 which implies dividend yield of 3.1%.

• Earnings forecast. No change to our earnings forecast.

• Outlook. Despite prevailing buoyant sales volume, the planned targeted fuel subsidy may jeopardise the outlook for fuel demand.

Source: BIMB Securities Research - 27 Feb 2024