"We expect little impact from COVID-19-led slowdown as PETGAS is an essential needs provider while the business volume should improve as businesses reopen," it said.
The research house added that the regulated tariff rate in RP1 in 2020-2022 will provide earnings certainly over the next three years.
"With earnings clarity after the RP1 announcement, focus will revert to its operational efficiency especially for Utilities as earnings for GT, GP and RGT are fairly predictable.
"As such, earnings certainty is high but with limited earnings growth prospects," it added.
Kenanga sees value re-emerging in Petronas Gas following a 7% drop in its share price in the past three months, with a decent yield of about 5%.
Following 1QFY20 results that met expectations, the research house upgraded Petronas Gas to outperform and raised its target price to RM17.20 a share from RM16.25 previously.
According to Kenanga, the recent quarterly core net profit of RM520mil was 27% and 29% of its and consensus full-year estimates.
On a sequential basis, 1QFY20 core profit was 10% higher on the back of a 2% rise in revenue, largely due to higher earnings from RGT on RM24.5mil on higher base tariffs and gas processing on RM20.5mil performance incentive.
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