PETALING JAYA: The elevated natural gas price bodes well for Gas Malaysia Bhd
with its earnings expected to be uplifted for its financial year 2022 (FY22), in line with the long-term interest in natural gas for its role in the transition to clean energy usage.
In a report, MIDF Research said the natural gas distributor’s earnings had been growing in line with the Henry Hub price benchmark, while the recovery of Malaysia’s economy should help Gas Malaysia’s earnings resilience to continue moving forward.
“Geopolitical tensions and shortages of natural gas in Europe, as well as the upcoming Northern Hemisphere winter season in the and the recovery of China’s economy, continue to push prices of natural gas higher,” it said.
“With activities within industrial and domestic premises continuing to normalise post-pandemic, we believe Gas Malaysia will continue to operate efficiently,” it added.
MIDF Research noted that there are risks from rising freight rates, one-off refinery taxes and lower sale volumes for natural gas, both locally and regionally.
The research firm expects Gas Malaysia will remain competitive and be opportunistic in expanding its operations in the near term.
Meanwhile, Kenanga Research expects Gas Malaysia’s earnings to peak in FY22 as gas prices ease going into FY23.
“Its long-term earnings remain defensively backed by its regulated business, which will anchor its dividend yield of more than 7%,” the research house added in a report.
Kenanga Research noted that Gas Malaysia expects upcoming gas selling prices to be higher quarter-on-quarter (q-o-q) in both 4Q22 and 1Q23 given the solid Malaysia Reference Price (MRP).
Gas Malaysia’s core profit for the first nine months of FY22 surged by 63% year-on-year to RM293.7mil on the back of a 39% jump in revenue due to a higher gas selling price.
“MRP soared 65% to RM43.575 per million metric British thermal units (mmbtu) in the nine months, compared to RM26.368 per mmbtu last year,” it said.
Kenanga Research stated that Gas Malaysia acknowledged the importance of demand from the rubber glove sector to its future growth prospects.
“Despite the uncertain outlook for the rubber glove industry, Gas Malaysia expects 4Q22 volume to remain stable, if not slightly higher q-o-q, as the industrial customers always ramp up production in the 4Q,” Kenanga Research noted.
Without any guidance from Gas Malaysia, Kenanga Research has projected sales volume growth of 3% in FY23.
Kenanga Research raised its earnings estimates for Gas Malaysia’s FY22 and FY23 by 11% and 7%, respectively, to reflect higher margin assumptions.
With its “outperform” call maintained for Gas Malaysia, Kenanga Research has raised its target price (TP) by 11 sen to RM3.52 per share.
MIDF Research, on the other hand, maintained its “buy” call on the company with a TP of RM3.92 per share and made no changes to its earnings estimates for Gas Malaysia.
