Petronas Gas slides to low of RM18.14

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: Shares of Petronas Gas fell to a low of RM18.14 as analysts downgraded the stock after the recent rally and possible earnings erosion from the new third party access (TPA) which started on Tuesday.

At 10.34am, it was trading at RM18.34, down 56 sen with 85,400 shares done.

The FBM KLCI was down 5.93 points or 0.32% to 1,819.98.

AmInvestment Research downgraded its recommendation from Hold to Sell for Petronas Gas as the share price has risen above its slightly higher sum-of-parts-based (SOP) fair value of RM16.65 a share (from an earlier RM16.60).

This implied an FY18F price-to-earnings (PE) of 18 times, a 20% discount to the two-year average of 23 times. 
 
“Our revised sum-of-parts stems from the 3% increase in FY18F earnings, as we have removed the assumption for a two percentage points reduction from our estimated FY16 return on depreciated replacement cost or regulated asset base (RAB) for the gas transportation segment of 17% under the Gas Supply (Amendment) Act 2016’s TPA implementation, which commences today,” it said. 

Hence, the stock currently trades at an unjustified FY18F PE of 20 times with its earnings likely to erode over the longer term under the new TPA terms, said AmInvest Research.

CIMB Equities Research is retaining its hold call on Petronas Gas with an unchanged target price of RM19.40. It said 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,” it said.