KUALA LUMPUR: The weekly fixing of pump prices is positive for Petronas Dagangan (PetDag) as it reduces the exposure time of petrol dealers to Means of Platts Singapore (MOPS) prices from one month previously, to seven day, according to MIDF Research.
“This would mean that the likelihood of PetDag experiencing lag loss due to steep declines in crude oil/MOPS prices is reduced.
“The weekly price fixing will further strengthen PetDag’s continuous initiative in managing their inventory turnaround days of approximately 4-5 days,” the research house said.
Domestic Trade, Cooperatives and Consumerism Minister Datuk Hamzah Zainuddin announced yesterday that the ceiling price for fuel would be announced weekly from April.
MIDF believe that in a competitive price environment, where dealers are able to offer discounts (with the permission of KPDNKK), PetDag would have the upper hand in offering more competitive pump prices with additional perks at its Kedai Mesra stores as it has the most petrol stations in Malaysia and its ability to fund heavy upgrade capex at its dealerships.
“We are upgrading PetDag to ‘buy’ (from neutral previously), with a target price of RM26.91 per share. Our valuation is premised on PER17 of 28 times pegged to EPS17 of 96.1sen. The target PER is based on PetDag’s average four-quarter rolling PER over the past five year,” it said.