KUALA LUMPUR: Petronas Dagangan Bhd
’s sales volume growth is projected to be slow amid moderate economic growth and weak consumer sentiment, said Hong Leong Investment Bank (HLIB) Research.
The research house said on Thursday it also does not anticipate significant core profit growth in 2017 due to slowdown in oil and gas upstream industry.
HLIB Research said that in the third quarter of financial year 2016 (3QFY16), Petronas Dagangan's operating margins were generally higher year-on-year due to improvement in margin from both retail and commercial division. The commercial division was lifted by higher profitability of aviation and fuel oil.
It also noted that while the retail division grew merely by 1% on-year, it is a commendable growth as the overall industry’s growth remained tepid.
Year-to-date, fewer petrol stations were opened, only about two to three stations. The management has indicated that it would not focus on increasing number of stations , but would rather focus on repair and petrol station upgrade works to improve customer experience.
Seasonally, Petronas Dagangan's operating expenditure would increase on-quarter in 4Q16 as the company would usually ramp up its maintenance and refurbishment works in the petrol stations when closer to the year end.
To note, 67 stations in Johor, Klang Valley and Negeri Sembilan have suspended their operations to undergo necessary upgrades to ensure they meet higher safety requirements.
All capital expenditure for such upgrades would be borne by Petronas NGV (PNGV), outside of PetDag.
HLIB Research reiterated its “hold” call on Petronas Dagangan and also left the target price unchanged at RM23.53, based on unchanged forecast FY17 price-to-earning ratio of 26 times.
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