PETALING JAYA: Fuel retailer Petronas Dagangan Bhd
(PetDag) is expected to maintain uninterrupted fuel supplies despite heightened geopolitical tensions, supported by healthy inventory levels and close coordination with Petco Trading Labuan Co Ltd.
Petco is the trading arm of the Petroliam Nasional Bhd (PETRONAS) group that supplies fuel to PetDag.
Following a meeting with PetDag’s management, Hong Leong Investment Bank (HLIB) Research said fuel inventories are maintained at around three to five days at petrol stations and three to 10 days at terminals through PetDag’s integrated inventory management system.
The government has also assured adequate national fuel supplies through end-2026.
However, HLIB Research house expects PetDag’s retail earnings to moderate in the second quarter of financial year 2026 (2Q26) as lower Brent crude prices reduce inventory gains that had boosted margins in the previous quarter.
“”Following the sharp increase in Brent crude prices in the 1Q26, which lifted retail earnings before interest and taxes (Ebit) margins to 5.1% from 2% in the preceding quarter, Brent prices have since fallen by about 38%, averaging US$73 per barrel in the 2Q26 compared with US$118 per barrel in the 1Q,” it said in a report.
As such, the research house expects retail Ebit margins to normalise to around 4%.
In addition, petrol sales volumes are expected to grow at a slower pace in the 2Q as demand normalises following the festive and holiday travel season that boosted sales in the 1Q.
“Despite the reduction in the Budi95 monthly subsidy quota to 200 litres (from 300 litres) effective April 2026 – with the RON95 price maintained at RM1.99 per litre – retail volumes have been resilient as only a small fraction of Malaysians pump more than more than 200 litres per month.
“In a recent parliamentary reply, it was revealed that less than 1% of Budi95 users consistently consumed over 200 litres of RON95 between October 2025 and May 2026,” HLIB Research noted.
According to the research house, the resilience of PetDag’s retail motor petrol volumes is further supported by users’ stickiness to its fuel payment app, Setel.
It noted that since the rollout of Budi95 in September 2025, the subsidised-to-unsubsidised RON95 sales volume mix has remained broadly stable at about 90:10.
“Separately, we believe the recent inclusion of diesel into the fuel subsidy scheme (Budi Diesel), effective this month, should lead to higher retail consumption.”
HLIB Research expects the commercial segment to gradually recover in the 2Q as lower Brent crude and jet fuel prices narrow the lag in passing higher procurement costs to customers, supporting an improvement in margins.
Meanwhile, PetDag is advancing its hybrid super station concept, which aims to transform conventional highway service areas into integrated mobility hubs offering fuel, electric vehicle (EV) charging, retail and lifestyle services.
The first station is targeted to begin operations by 2028, with construction costs estimated at three to four times those of a conventional petrol station.
The research house said the initiative should strengthen PetDag’s long-term non-fuel earnings by expanding its convenience retail, food and beverage, and EV charging businesses.
From a valuation perspective, HLIB Research said the stock is trading at 17.4 times its financial year 2027 (FY27) price-to-earnings ratio, below its five-year historical average of 20 times, while offering an attractive dividend yield of about 5.5%.
“As such, we maintain our ‘buy’ rating on PetDag, with unchanged target price of RM21.34 based on 19 times FY27 earnings per share,” the research house said.
An analyst covering the oil and gas sector said Jet A1 sales volumes should continue to be underpinned by strong tourist arrivals and ongoing recovery in travel activity, although elevated fuel prices and geopolitical tensions remain downside risks.
Furthermore, he said the current share price has largely priced in near-term earnings challenges, leaving room for attractive upside.
Shares of PetDag traded at RM19.56 at the time of writing, down 8.3% in the past one year.
