Gas Malaysia said the CHP technology is projected to make a significant contribution to FCM’s sustainability goals.
PETALING JAYA: UOB Kay Hian (UOBKH) Research sees Gas Malaysia Bhd
benefitting from higher demand capacity in its distribution arm.
This will help to buffer the relatively flattish natural gas (NG) prices expected in 2024.
It said demand for the retail arm could increase 5%-6% year-on-year (y-o-y) in the first quarter of this year (1Q24).
However, earnings will likely be dragged down by a 30% drop in NG prices.
With this, UOBKH Research has raised 2024-26 net profit forecasts by 5% and offers an attractive dividend yield of 7% in the near term.
The research firm noted that Gas Malaysia’s retail arm, Gas Malaysia Energy & Services (GMES), reported strong profit of RM220mil in 2023, which accounted for 58% of reported net profits.
This was driven by higher NG prices despite a drop in the NG volume sold during the year.
“Stepping into 1Q24, we expect NG prices of RM41.51 per million British thermal units (mmBtu).
“This is higher quarter-on-quarter but lower than 1Q23’s RM58.17 per mmBtu.
“This is expected to be partly offset by higher NG volume growth of 5%-6% in 1Q24,” said UOBKH Research.
For 2024, it expects NG prices to remain relatively stable or drop slightly from 2023’s RM46.92 per mmBtu.
The research firm said 2024 is a crucial year for GMES as customer contracts are up for renewal.
Gas Malaysia currently commands an 80% share of the NG retail market.
It added that the group recorded 1,050 industrial customers as at December 2023, out of which 38 customers were new while five customers expanded their operations.
UOBKH Research has kept its “hold” rating on the stock with a RM3.25 target price.
