SAF project, cafe expansion to buoy PETRONAS Dagangan

MIDF Research pointed out that SAF had been a crucial part of the company’s sustainability initiatives.

PETALING JAYA: MIDF Research remains positive on Petronas Dagangan Bhd’s ongoing sustainable aviation fuel (SAF) project, Cafe Mesra outlet expansion and integration of electric vehicle charging stations.

“We also continue to expect better sales volumes attributable to the anticipation of higher travelling frequency in the end-year holiday season.

“Additionally, the green mobility initiatives and clean fuel projects remain a leverage to an attractive and healthy investment for PETRONAS Dagangan,” it said.

The research house added that fuel prices are also expected to be relatively stable, following the average Brent crude oil price at US$73 per barrel in the third quarter of the year.

MIDF Research, which maintained its “buy” call on PETRONAS Dagangan with an unchanged target price of RM24.63, pointed out that SAF had been a crucial part of the company’s sustainability initiatives.

Among PETRONAS Dagangan’s efforts to develop and promote SAF include entering into strategic partnerships with Malaysia Aviation Group and Finland’s Neste to establish a robust SAF supply chain.

PETRONAS Dagangan had also undertaken refining, storage and distribution facilities improvements for SAF, and entered into collaborations with government bodies to advocate for supportive policies for SAF adoption.

The SAF initiative is in the blending of the biofuel, in accordance with the requirements dictated by the airlines that use it.

However, the research house said SAF was still facing an operational cost challenge such as higher pump price, which is expected to be three-to-five times higher than Jet A1 fuel.

In addition, the differing regulations and pricing model of SAF blends may also hamper demand.

As for its Cafe Mesra business, MIDF Research said the shift in customer spending and expiring contracts from other food and beverage partnerships would be a positive development for its convenience business in the long term, given that coffee consumption in Malaysia had grown over 75% since 2020.

MIDF Research said following the commencement of the targeted subsidy rationalisation for diesel since June, retail volume for diesel had decreased by 30% to 50%.

However, the same volume was gained by the commercial segment.

The research house said commercial diesel is a highly regulated commodity in Malaysia, and retail diesel has a higher profit margin.