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: CIMB Equities Research is retaining its target price of RM18.10 for Petronas Gas and also the hold call as it sees earnings risk beyond 2018 due to the Third Party Access’s (TPA) tariff revision.
It said on Tuesday its target price was based on 17.8 times CY19F price-to-earnings (P/E), a 20% discount to its five-year historical mean P/E.
“The 20% discount is the mid-point of the earnings downside in our best- and worst-case scenarios. We keep our Hold call despite the potential FY18-20F dividend yield of 4%, as we see earnings risk beyond 2018F arising from TPA’s tariff revision,” it said.
CIMB Research said according to Petronas Gas, the regulator might be using book value as the regulated asset base (RAB) under the TPA, instead of the currently-used depreciated replacement cost (DRC).
“The changes could take place through staggered transition over the years to minimise the earnings impact. The TPA could affect the group’s regasification and transportation divisions (both making up a total c.67% of 1H18 gross profit) and our rough analysis reveal a potential 25% earnings downside if book value is used as the RAB,” it said.
To recap, the research house recently met up with Petronas Gas for an update, focusing on the TPA details and its impact on the group.
The TPA system will allow any party to have access to and utilise the gas facilities available in Malaysia in an attempt to liberalise the gas market in Malaysia under the country’s Economic Transformation Programme (ETP).
There are three types of gas facilities that fall under the scope of the TPA, namely regasification terminals, transmission pipelines and distribution pipelines.
Implemented in January 2018, TPA’s current tariffs for the utilisation of the Peninsular Gas Utilisation system, Regasification Terminal Sungai Udang and Regasification Terminal
Pengerang will remain until end-2018.
The current gas transportation tariff is RM1.248/GJ in Peninsular Malaysia, while the current tariff for regasification has not been disclosed.
CIMB Research expects the new tariffs under the TPA to be revealed at end-November 2018.
It also said Petronas Gas does not have a formal dividend policy, but the group has been paying out 70% of its net profit as dividend for the past two years.
“Despite the potential earnings risk from TPA, management has guided that the group is looking to maintain the absolute dividend amount to reward its shareholders.
“Assuming that the TPA is implemented in stages, we believe Petronas Gas should be able to maintain the absolute amount of DPS by increasing its dividend payout ratio,” it said.
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