• Maintain HOLD (TP: RM3.83). Gas Malaysia Berhad (GMB) 3MFY24 core profit of RM103mn came above our estimate however inline with consensus at 32% and 28% respectively. The company’s 1QFY24 headline profit rose by 7.9% YoY mainly due to higher natural gas volume (+4.0% YoY) and lower operating cost (-25% YoY). No dividend was declared. We upgrade our FY24F/FY25F earnings forecast by 16.9%/29.3% on higher MRP gas price and margin assumptions. We expect the company to benefit from sturdy gas demand from its main offtaker; (Food, Beverage & Tobacco and Rubber Glove sector). Maintain a HOLD call on Gas Malaysia with a higher DCF-derived TP of RM3.83 (from RM3.53) that implies 13x FY24F P/E.

• Key highlights. The natural gas cost purchased from PETRONAS Energy & Gas Trading Sdn. Bhd (PEGT) in 1QFY24 made up of 89% from revenue (vs 92% in 1QFY23). This led EBITDA margin to expand to 8.6% (vs 1QFY23: 6.1%). The tolling fees on the other hands, surged 69% YoY to RM40.5mn.

• Earnings Revision. We upgrade our 2024F/2025F earnings forecast by 16.9%/29.3% to RM369mn/RM326mn as we revised our MRP gas price and margin assumptions.

• Outlook. We anticipate that GMB’s earnings will remain sturdy in the upcoming quarters on the back of elevated Malaysian Reference Price (MRP) benchmark gas price. As guided by management, the MRP for 2024 is estimated to linger around RM41.51/GJ to RM45.10/GJ, which is still deemed to be above average compared to pre-Ukraine-Russian war prices.

Source: BIMB Securities Research - 27 May 2024