Review

• Petronas Gas Berhad’s (PETGAS) FY23 core profit of RM1.9bn (+9.3% YoY) came in within expectations at 95% and 100% of ours and consensus’ fullyear forecasts respectively.

• PETGAS declared a fourth interim dividend of 22.0sen/share in 4QFY23 (4QFY22: 22.0sen/share), bringing the YTD DPS to 72.0sen (FY22: 72.0sen).

• QoQ: 4QFY23 core profit dropped 8.5% QoQ mainly attributed to higher maintenance expenses. All four segments registered lower gross profit QoQ.

• YoY: 4QFY23 core profit surged 17.5% YoY driven by lower IGC expenses in line with the downward movement in natural gas prices, as well as higher share of profit from joint venture companies (increased more than five folds YoY).

• YTD: FY23 core profit grew 9.3% YoY on the back of: (i) higher contribution from utilities segment following the upward revision in ICPT surcharge; (ii) lower exposure to foreign exchange movement and lower finance cost following the early settlement of USD lease liability of floating storage units at Sungai Udang LNG regasification terminal; (ii) higher share of profit from joint venture companies (+87.2% YoY); and (iii) lower tax expense due to absence of prosperity tax in FY23.

Impact

• No change to our earnings forecasts pending analyst briefing later today.

Outlook

• PETGAS has finalised and agreed with the key terms of the 3rd term Gas Processing Agreement (GPA) with Petronas and the agreement has commenced effective 1 Jan 2024.

• Moving into 1QFY24, MRP is estimated to trend upwards from 4QFY23 levels, leading to higher IGC expenses QoQ.

Valuation

• Maintain Buy with an unchanged target price of RM20.60/share based on sum-of-parts valuation.

Source: TA Research - 28 Feb 2024