MIDF Research, which reiterated a
PETALING JAYA: Although volume growth is expected to remain subdued in view of the relatively weaker economic outlook, Gas Malaysia Bhd
’s earnings forecasts for financial years of 2016 until 2018 (FY16-18) have been raised by 4-5%, primarily due to more streamlined operations.
AllianceDBS Research said on Friday that it believes GMB’s growth outlook remains subdued in the near term, in tandem with the moderation in the industrial sector.
The company’s financial results of third quarter of financial year 2016 (3QFY16) has beaten expectations. GMB’s 3QFY16 earnings came in at RM43.1mil, rising by 28% on year-on-year (YoY) comparison. However, despite the increase in natural gas tariff effective July 16, 3QFY16 gross margin remained steady at 5.9% due to the full implementation of the cost pass-through mechanism.
The research house has highlighted that sluggish economic outlook may reduce the gas consumption of industrial players. However, it also added that gas supply from Petronas is not
a constraint for GMB, given the low utilisation at the Malacca regasification terminal.
AllianceDBS Research has maintained its “hold” call and revised up its target price to RM2.60.
Meanwhile, MIDF Research said that GMB has seen commendable rise in revenue, as its 3QFY16 revenue rose by 19.2% YoY, exceeding RM1.1bil largely due to higher volume of gas sold and the upward revision of natural gas tariff.
The research house noted that GMB’s management has informed that the increase in volume of gas sold and number of customers will sustain for the second half of financial year 2016 (2HFY16) into FY17.
“Given the better than anticipated gas volume sold, we raised our FY16 and FY17 earnings estimates by 10.3% and 5.3% respectively,” said MIDF Research in its report.
The research house has maintained its “buy” recommendation on GMB’s shares and raised the target price to RM3.07 per share.
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