PETALING JAYA: Petronas Dagangan Bhd
(PetDag) is expected to see a firmer year for its retail fuel business as tourist arrivals pick up under the Visit Malaysia 2026 (VM26) campaign and as domestic economic activity remains robust.
In a note to clients, MBSB Research said the demand backdrop was improving after some softness last year, when the retail segment was weighed by a declining price trend.
“The retail segment is expected to recover this year after a weaker performance last year due to the declining prices trend,” the research house said, adding that the price trend remains a concern.
Beyond demand, MBSB Research flagged network expansion and higher contributions from ancillary offerings as additional levers for the retail division.
PetDag operates about 1,100 petrol stations nationwide and plans to add three to four stations a year. It also runs around 80 Mesra Cafe outlets.
“This segment is expected to contribute over 15% of profit before taxes in the long term, up from the current 10%, supported by store expansion and extended offerings from food and beverages partners,” the research house said.
Attention is also on PetDag’s commercial business, where MBSB Research expects jet fuel to remain the anchor this year, supported by stronger air travel linked to the VM26 push. Jet fuel contributes about 50% of the commercial segment’s business, it said.
“While price fluctuations may cause quarterly margin volatility in the commercial division, these are likely to balance out over the year.
“Given the trend of elevated jet fuel prices, commercial margins are expected to be sustained this year.”
Looking ahead, MBSB Research pointed to sustainable aviation fuel as a longer term growth avenue as PetDag expands beyond conventional fuels.
The company aims to produce sustainable aviation fuel in house by 2028 or 2029 at the Pengerang petroleum complex in Johoer, with a planned capacity of 650,000 tonnes per year.
MBSB Research said the plan is aligned with the government’s sustainable aviation fuel blending mandate of 1% from next year, rising to 47% by 2050.
“The company’s expansion into non-fuel businesses, particularly new energy and green fuels are another catalyst for the company in the long term,” it said.
MBSB Research said PetDag remains supported by its stable business model, strong brand positioning, dividend profile and consistent profitability.
It maintained a positive stance on the stock’s outlook for this year, citing inelastic demand characteristics and support from domestic consumption alongside the VM26 campaign.
“We are positive on PetDag’s outlook this year, owing to the inelastic demand of its products, underpinned by strong domestic demand and the Visit Malaysia initiative,” it said.
The research house revised its target price to RM23.64 from RM25.19 after adopting a price-earnings multiple of 19.3 times, which it said reflects the company’s three year average, and applying it to this year’s earnings per share estimate of 122.5 sen.
