GASMSIA’s FY23 results met expectations. We expect its earnings to revert to normalcy from the bumper years enjoyed during the pandemic that were stoked by abnormally high gas prices. We keep our FY24F net profit forecast but project its FY25F earnings to decline by 5%. We maintain TP of RM3.33 and MARKET PERFORM call. The stock offers a dividend yield of >6%.

GASMSIA’s FY23 core profit of RM383.4m met expectations. It declared a 2nd interim NDPS of 8.42 sen (ex-date: 19 Mar; payment date: 03 Apr), totalling FY23 full-year NDPS to 14.1 sen against the 23.8 sen paid in FY22 and our FY23 assumption of 20.0 sen. However, the company confirmed that it will propose a final dividend in the board meeting next month.

YoY, despite its sales volume falling 10% to 148.7m GJ, its FY23 revenue rose 6% to RM8.08b on the back of higher gas selling prices where Malaysia Reference Price (MRP) jumped 28% to RM46.41/mmbtu in FY23. Nonetheless, its FY23 core profit dipped slightly by 3% to RM383.2m mainly due to a lower gas volume as mentioned above.

QoQ, its 4QFY23 revenue slid slightly by 1% due to lower gas selling prices (as MRP declined 10% to RM37.60/mmbtu), partially mitigated by a 4% hike in its sales volume to 38.8m GJ. However, its core profit grew 22% to RM104.6m due to higher sales volume as mentioned above.

The key takeaways from the results briefing are as follows:

1. In FY23, GASMSIA chalked a net addition of 21 industrial accounts (38 new accounts, partially offset by the non-renewal of 17 existing accounts). Five customers requested for increased supply. Nonetheless, FY23 sales volume fell 10% to 148.7m GJ from 164.8m GJ in FY22.

2. The 4% increase in 4QFY23 sales volume was mainly driven by consumer products (+10%), followed by glove manufacturers (+2%). GASMSIA believe that the earlier demand downtrend from glove manufacturers has bottomed.

3. It expects gas selling price to be lower in FY24 as compared to FY23 (MRP was very strong in 1HFY23, averaging RM53.16/mmbtu)

Forecasts. We maintain our FY24F net profit forecast with a margin assumption of RM2.50/mmbtu while project its FY25F earnings to decline by 5% on a lower margin assumption of RM2.30/mmbtu as gas selling prices normalise.

Valuations. We also maintain our DCF-derived TP of RM3.33 based on a WACC of 6.5% and a TG of 2%. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by use (see Page 5).

Investment case. We like GASMSIA for its: (i) strong market position, being a key natural gas retailer in Malaysia, (ii) strong earnings visibility underpinned by its ability to retain customers, typically, via 3-year contract, and (iii) strong free cash flows generation anchoring a dividend yield of >6%. However, there is a lack of catalyst given that its earnings have already peaked in FY22 with gas prices easing. Maintain MARKET PERFORM.

Source: Kenanga Research - 21 Feb 2024