KUALA LUMPUR: Gas Malaysia’s 2Q20 net profit was in line with Maybank Investment Bank and market expectations, with movement control order (MCO) induced volume weakness being offset by a higher spread.
“Maintain Hold with an unchanged RM2.80 target price, ” it said on Friday.
Maybank Research said despite the regulatory opacity, it expects Gas Malaysia to maintain its c.RM2/mm BTU historical spread in the current regulatory period.
“Results in line Gas Malaysia’s 2Q20 net profit of RM45mil (-9% YoY, -7% QoQ) brings 1H20 net profit to RM92mil (+3% YoY), 51% of both our/consensus full-year forecasts respectively.
“We estimate Gas Malaysia’s 2Q20 spread at c.RM2.40/mmBTU (elevated relative to our RM2/mmBTU assumption), although we note that spreads can be volatile on a quarterly basis, ” it said.
Gas Malaysia declared a first interim DPS of 4.25sen (-11% YoY), with the implied payout ratio (1H20: 59%) being slightly below previous run-rates (c.70%).
With customer operations being affected to varying extent by the MCO, Gas Malaysia’s 2Q20 volume unsurprisingly declined both QoQ and YoY.
"The eventual P&L impact from the volume shortfall remains unclear, with no indication that the elevated 2Q20 spread was due to revenue-cap adjustments (the distribution segment runs on a fixed-revenue model). Management noted that volume had largely normalised in June 2020," it said.
Separately, receivables climbed QoQ despite Gas Malaysia having reduced its previously-accumulated gas cost under-recoveries during the quarter, thus implying possible collection issues.
“Our earnings forecasts, Hold rating and RM2.80 TP (DCF-based assuming 7.8% WACC and 2% long-term growth) are unchanged. Current regulatory parameters remain largely undisclosed.
“For sensitivity purposes, every 5 sen/mmBTU change to our spread assumption on a full year basis would move our FY20 net profit forecast by 4.4%, ” it said.
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