HLIB Research said that demand for gas and utilities would remain stable going into FY24.
PETALING JAYA: Petronas Gas Bhd
’s (PetGas) earnings in the fourth quarter of financial year 2023 (4Q23) is expected to remain stable, driven by continued demand for utilities and gas, while the drop in fuel gas prices will be negated by the planned higher maintenance activities.
In 3Q23, PetGas posted core profit after tax and minority interests (Patami) of RM476.8mil, down 8.6% quarter-on-quarter (q-o-q) and down 5.5% year-on-year.
This brought 9M23 Patami at RM1.4bil.
The results were within the expectations of analysts.
Hong Leong Investment Bank (HLIB) Research said the demand for gas and utilities would remain stable going into FY24.
However it said the company’s management guided that overall margins for 4Q23 would be affected by the planned higher maintenance activities, which would be negated by the slight drop in Malaysia Reference Price gas prices.
It added that negotiations with parent company, Petroliam Nasional Bhd (PETRONAS), on the new gas processing contract has concluded with minor details being finalised.
According to HLIB, PetGas’ management is also exploring new business opportunities such as 150MW large-scale solar, 40MW mini hydro and carbon capture and storage facility in Kerteh, under the recently launched National Energy Transition Roadmap (NETR) to complement its existing business.
Meanwhile, its liquefied natural gas storage expansion in Pengerang, Johor, is expected to achieve a commercial operation date by mid-2025 with a capital expenditure of RM100mil while the Sipitang power plant engineering, procurement, construction and commissioning is within schedule.
As for dividends, the research house expects PetGas to maintain its payout, backed by a healthy net cash position of 44.4 sen per share.
In the 3Q23, the company declared a third interim dividend of 18 sen a share with the ex-date on Dec 4, 2023.
While PetGas’ financial performance in the final quarter is projected to remain robust, the volatile Brent price and foreign exchange movement in light of the turmoil in the Middle East would have an effect on the pricing and demand of natural gas, said MIDF Research.
Even so, the research firm said PetGas is committed to maintaining its operational excellence.
“We are also expecting utilities to continue to be the major revenue stream in the near to mid-term in light of the government’s initiatives for a sustainable power generation via the NETR,” said MIDF Research, which kept a “buy” call on the stock with a RM18.75 target price.
CGS-CIMB Research said among the green energy initiatives PetGas is looking at is carbon capture and storage, where it has an ongoing cooperation with PETRONAS to assess the feasibility of constructing an onshore carbon dioxide gathering hub in Kertih as part of the latter’s decarbonisation programme.
In the hydro space, PetGas signed a memorandum of understanding with Mentri Besar Terengganu Incorporated in June 2023 to explore the potential development of a 40MW mini hydro plant, with the final investment decision on the project expected to be determined in the second half of 2024.
Additionally, there is the ground-mounted solar farm development at its land in Kerteh to supply green electricity to its customers within the utilities segment.
