Petronas Dagangan core earnings below forecast

The rating agency said the average price of RON95 fuel fell only 0.3% year-on-year (y-o-y) in April, compared with a 4.4% y-o-y decline in March.

KUALA LUMPUR: Petronas Dagangan’s core net profit for the first quarter ended March 31, 2018 was below expectations at only 19% of CIMB Equities Research and consensus full year forecasts as retail and commercial earnings were impacted by higher operating expenditure (opex) costs.

The research house said on Monday total sales volume grew by 3% on-year, driven by the strong 8% growth in commercial sales volume but partially offset by a disappointing 2% drop in retail sales volume. 

“We cut our FY18F EPS forecast on account of higher opex but the cuts for FY19-20F are smaller given sales opportunities from the 1Q19F start of the RAPID refinery. 

“We maintain Add with a lower dividend discount model-based target price of RM28.60. Potential re-rating catalyst: rising market share once the RAPID refinery starts up,” it said.

CIMB Research said Petronas Dagangan’s core net profit of RM204mil was 19.4% lower on-year due to higher opex across both the retail and commercial segments. 

Retail margins fell as it produced more LPG cylinders to grow sales volume. Commercial margins fell as it invested in marketing in order to boost volume of fuel oil sales. 

Also higher salaries and benefits for Petronas Dagangan’s staff affected the margins of both retail and commercial segments.