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: Petronas Gas’s FY18 core net profit came in within expectations, at 99% of CIMB Equities Research and 101% Bloomberg consensus forecasts.
The research house said on Tuesday FY18 core earnings (excluding forex and one-off de-recognition of deferred tax assets) increased 10% on-year, largely supported by the second LNG regasification terminal in Pengerang, Johor which started commercial operations in November 2017.
Petronas Gas’ 4Q18 revenue rose 5% on-year, supported by: (i) regasification (+11% on-year) due to contribution from the new LNG regasification terminal in Pengerang, and (ii) utilities (+15% on-year) due to favourable sales volumes for electricity and industrial gasses, coupled with higher product prices.
Nonetheless, 4Q18 core net profit declined 6% on-year as finance cost was higher due to recognition of previously capitalised interest expense following the completion of the new LNG regasification terminal.
“During the incentive-based regulation (IBR) pilot regulatory period in 2019, there will be no adjustments on the regulated asset base (RAB) and the RAB will continue to be valued at depreciated replacement cost (DRC).
“There will be a gradual migration in asset base from DRC to book value from 100% DRC to 60% DRC in RP1 (2020-2022), and from 40% DRC to 0% DRC in RP2 (2023-2025). Our rough analysis reveals a potential 25% earnings downside if book value is used as the RAB,” it pointed out.
CIMB Research’s target price was revised to RM18.50. Despite the expected earnings step-down following the implementation of IBR, it keeps its Hold call given its stable dividend yield of c.4% for FY19-21F.
The key downside risk to its Hold call is worse-than-expected earnings following the IBR tariff revision, while key upside risks include better-than-expected regulatory earnings allowed under IBR.
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