KUALA LUMPUR: Petronas Dagangan Bhd
's earnings margin is not expected to be impacted by the government's announcement that dealer comissions for RON95 and diesel will be raised by 2.81 sen and three sen respectively.
According to a research note by Affin Hwang Capital research, it said the development is largely earnings neutral as the company's margin remains fixed at five sen per litre and 2.25 sen per litre for MOGAS and diesel, on the assumption the alpha remains fixed.
"We make no changes to our earnings forecast. We reiterate our HOLD rating and DCF-based target price unchanged at RM28.30 (WACC: 9.2%, 3% terminal growth), which implied a 27x FY19 PER."
The government's decision to raise the commission for the sales of RON95 and diesel for petrol operators comes as as it resume floating the retail pump prices on a weekly basis based on the APM mechanism.
Prices will be announced each Friday and will take effect on Saturday, but the price of RON95 will be capped at RM2.20 per litre.
"In view of the recent decline in global oil prices, current RON95 price will be reduced by RM0.17/litre to RM1.93 (from RM2.20). Meanwhile, the new diesel price is set lower at RM2.04 (from RM2.18) for this week."
Affin Hwang noted that the take up of RapidKL's unlimited travel passes would likely result in further pressure on the already challenging retail volumes.
The working class may commute more as the daily cost saving is greater than the previous SMART Packages 7 weekly and SMART 30 Monthly, it said.
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