Higher operating costs weigh on PetGas’ bottom line


In its exchange filing, the company said lower earnings were due to higher operating costs of gas processing, gas transportation, and regasification segments in relation to depreciation, maintenance, and internal gas consumption.

PETALING JAYA: Petronas Gas Bhd (PetGas) posted a lower net profit of RM439.07mil in the second quarter ended June 30, 2021 (Q2’FY21), compared with RM547.1mil in the corresponding quarter a year earlier.

In its exchange filing, the company said lower earnings were due to higher operating costs of gas processing, gas transportation, and regasification segments in relation to depreciation, maintenance, and internal gas consumption.

These were offset by higher contribution from the utilities segment due to stronger margins and lower operating costs, mainly fuel gas, it added.

The group had proposed a second interim dividend of 16 sen per share.

During the quarter in review, PetGas’ revenue slid to RM1.38bil from RM1.4bil in Q2’FY20 on lower contribution from the utilities segment, in line with lower product prices amid higher sales volumes.

Its earnings per share was 22.19 sen, compared with 27.65 sen previously. Year to date, the group’s net profit was higher at RM955.47mil, compared with RM915.22mil in the first half of 2020 (H1’FY20), while revenue came in lower at RM2.72bil, compared with RM2.80bil previously.PetGas managing director and CEO Abdul Aziz Othman said the H1’FY21 results reflected the group’s sound operations and capital management strategy.

“While we continue to improve our operational efficiency and rationalise costs, we expect a slight increase in overall repair and maintenance compared to last year with relatively more plant reliability activities planned for 2021.

“Moving forward, we will enhance our focus on growth and expansion in utilities segment by offering integrated energy and utilities solutions to industrial parks in Peninsular Malaysia,” he said.

Overall, PetGas said its performance this year was expected to remain resilient despite the ongoing pandemic as the group’s business model and long-term contracts ensures steady revenue streams, particularly for gas processing, gas transportation and regasification business segments. AmInvestment Bank Research said it maintained its “buy” call on PetGas, with a lowered sum-of-parts-based fair value of RM20.35 per share, compared with an earlier RM21.30 per share. The brokerage said this reflected a premium of 3% from its environmental, social and governance rating of four stars, as well as an FY21 price-earnings (PE) of 20 times.

“The stock currently trades at an attractive FY21 PE of 16 times, below its three-year average of 18 times together with highly compelling dividend yields of 8% which could potentially be even higher if management maintains its capital optimisation strategy,” AmInvestment Bank Research said.

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