The launch of the new grade could help ease tight condensate supplies in Asia. The sell tender is for a cargo loading March 21-31 from the Mekar Bergading Marine Terminal.
KUALA LUMPUR: CIMB Equities Research is retaining its hold call on Petronas Gas with an unchanged target price of RM19.40.
It said on Tuesday this was based on 17.8 times FY19F P/E (20% discount to historical five-year mean price-to-earnings (P/E).
The research house said the 20% discount is the mid-point of possible earnings downside in its best- and worst-case scenarios. The stock now trades at 17.3 times FY19F P/E, which is on par with its historical five-year average P/E.
Petronas Gas announced that the Third Party Access (TPA) system will be implemented from Tuesday.
The Energy Commission has confirmed that the current tariffs for the utilisation of the Peninsular Gas Utilisation system, Regasification Terminal Sungai Udang and Regasification Terminal Pengerang will be maintained until end-2018.
To recap, the TPA system will allow any party to have access to and utilise the gas facilities available in Malaysia in an attempt to liberalise the gas market in Malaysia, which is one of the objectives of the Economic Transformation Programme (ETP).
“There are three types of gas facilities that fall under the scope of the TPA, namely regasification terminals, transmission pipelines and distribution pipelines. The Gas Supply Act 1993 is the main legal framework for the TPA.
“The implementation of the TPA will affect Petronas Gas’s regasification and transportation division. Petronas is currently the sole customer of Petronas Gas’s gas transportation and regasification assets.
“Currently, depreciated replacement cost (DRC) is used as the asset value in Petronas Gas’s existing contracts with Petronas (not book value), while the rate of return allowed is c.9%,” it said.
CIMB Research said the current gas transportation tariff is RM1.248/GJ in Peninsular Malaysia while the current tariff for regasification is not disclosed.
“With tariffs unchanged until end-2018, we believe that this indicates that Petronas Gas will still enjoy a rate of return of 9% based on DRC and there should not be any impact on its 2018 earnings.
“While the unchanged tariff under the TPA is positive to Petronas Gas, in our view, we see earnings risk beyond 2018 if there is any tariff revision under the TPA.
“Petronas Gas is still in continuous discussion with the Energy Commission on the framework and quantum of the tariff beyond 2018.
“In our view, the current tariff under the TPA may be lowered in the next review period as other companies subject to incentive-based regulation (IBR) are only allowed to earn 7.5%-8.0% return on capital. Gas transmission and regasification contributed 61% of Petronas Gas’s gross profit in FY16.
“In the event IBR uses the book value and allows only 8% return, the rate used in Gas Malaysia’s IBR, we estimate that there could be c.40% downside to our FY19F EPS,” it said.
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