KUALA LUMPUR: Petronas Dagangan is planning to spend RM300mil to RM400mil per annum in capex to refresh its Kedai Mesra stores, and relocate legacy pump stations to areas with a stronger demand catchment, says CIMB Equities Research.
It said on Thursday Petronas Dagangan is also engaging in new marketing innovations, such as: 1) tie-ups with Grab drivers, 2) expanding its breakfast-to-go menu, 3) offering discounted gift vouchers through the online retailer Lazada, and 4) planning to introduce fuel sales through mobile apps, or even door-to-door fuel deliveries.
Petronas’s early-2019F commissioning of its 300,000 barrels per day Pengerang refinery may result in a domestic surplus of refined products.
“As Petronas Dagangan is a subsidiary of Petronas, we think that it has a slight edge over its retail competitors to secure this additional output, which may help Petronas Dagangan push up its 60% commercial market share, in particular for jet fuel.
Petronas Dagangan’s current strategy is to forego lower-priced volumes in return for higher profits, but this reticence may no longer be necessary once the Pengerang refinery comes on-stream,” it said.
CIMB Research said Petronas Dagangan is scheduled announce its 3Q17F quarterly financial results on Friday, followed by an analyst briefing on Nov 13.
“We expect that Petronas Dagangan’s 3Q17F core net profit was stronger on on-year and on-quarter basis. The main reason for Petronas Dagangan’s earnings volatility is its four to five-day stock holdings.
“In a period of rising oil prices, which was the case in 3Q17, Petronas Dagangan’s inventory costs fell below actual pump selling prices, naturally leading to higher profit margins,” it said.
For the last five days of June 2017, the average Mean of Platts Singapore (MOPS) price for RON95 was US$58.78 a barrel, which was 11.7% lower than the average MOPS price for 3Q17 of US$66.53.
This means that Petronas Dagangan had very favourable inventory costs entering into 3Q17.
In contrast, in 3Q16, the inventory costs for the last five days of June 2016 averaged US$57.71, which was 5.4% higher than the average MOPS price for 3Q16.
“Given that Petronas Dagangan entered 3Q16 with unfavourable inventory costs but entered 3Q17 with favourable inventory costs, we expect Petronas Dagangan’ 3Q17F core net profit to be higher than in 3Q16.
“Applying the same logic, we also expect Petronas Dagangan to deliver better results in 3Q17F compared to either 1Q17 or 2Q17,” CIMB Research said.
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