KUALA LUMPUR: Financial research firm CreditSights has maintained its "market perform” recommendation on Petroliam Nasional Bhd (Petronas), with a preference for its shorter-dated bonds (2026-2032 maturities).
CreditSights said Petronas is marketing its new senior unsecured five-year (5Y), 10-year (10Y), and 30-year (30Y) US dollar bonds (A2/ A-/ NR), with proceeds to be used for general corporate purposes.
The research firm estimated the fair value for the bonds to be lower, at a US Treasury yield (T) of +75/90/99 basis points (bp), derived from extrapolating Petronas' secondary bond curve.
It also expects the bonds to price around T+83/93/113 bp, and anticipates further compression in the secondary market (5Y by 8 bp; 10Y by 3 bp, and 30Y by 14 bp).
In a note today, it said Petronas’ shorter-dated bonds are trading 15-25 bp tighter than PT Pertamina, with room for Petronas’ bonds to tighten slightly.
"Meanwhile, Petronas’ longer-dated bonds trade 50-60 bp tighter than Pertamina, which we view as fair. Overall, we are comfortable with Petronas’s sturdy credit profile, supported by its large-scale integrated oil and gas operations, robust net cash position, and strong state support and policy role to the Malaysian government,” it said.
CreditSights also said that it acknowledged positive development in the Petronas-Sarawak state dispute, however, it remains vigilant of any negative development should Sarawak further contest the reported agreement.
"While we acknowledge Petronas’ rising capex and persisting dividend payouts, we expect free cash flows to remain positive,” it added. - Bernama
