Latest news with #PETRONAS-linked
The Star
15-07-2025
- Business
- The Star
Cautious outlook for oil and gas industry
PETALING JAYA: The oil and gas sector is currently facing multiple headwinds that are likely to weigh on near-term performance and sentiment, says CIMB Research, which has maintained a 'neutral' stance on the industry. It said challenges on the immediate horizon include unstable oil prices driven by a deceleration in global economic activity and the resultant muted demand for crude oil and petrochemical products. The potential implementation of higher US tariffs may further suppress already fragile trade flows and external demand, while rising supply pressures from an anticipated increase in output by the Organisation of Petroleum Exporting Countries may exacerbate the downside risk to oil prices. In addition, the research house pointed to regulatory uncertainty stemming from the ongoing dispute between Petroliam Nasional Bhd (PETRONAS) and Petroleum Sarawak Bhd (Petros) over the role of gas aggregation in Sarawak. This may lead to a recalibration of PETRONAS' capital expenditure (capex) and operating expenditure commitments. Furthermore, unplanned operational disruptions at Petronas Chemicals Group Bhd (PetChem) facilities are expected to exert sustained pressure on the sector, resulting in weaker earnings momentum, delayed project execution and a more cautious investment sentiment across the value chain. 'We expect earnings weakness in the sector to persist into the second quarter of this year (2Q25), with core net profit projected to decline by 8.8% quarter-on-quarter (q-o-q), before rebounding by 24.1% q-o-q in 3Q25. 'Bumi Armada Bhd is likely to record a sharp decline of 42% from the previous quarter, owing to a 70% reduction in the daily charter rates for the floating production storage and offloading (FPSO) vessel Kraken under a revised agreement that became effective in April. 'Three PETRONAS-linked companies are also expected to post weaker earnings in 2Q25,' the research house said in a report to clients yesterday. Focusing on PetChem, CIMB Research projected the company to report a 5% q-o-q decline in 2Q25 earnings, weighed down by ongoing operational issues at its plants in Kertih in Terengganu and Gurun in Kedah, and continued downtime at the Pengerang Petrochemical Petrochemicals Complex in Johor since February. Likewise, the research house said it expects MISC Bhd 's core net profit to fall 24.9% q-o-q, largely owing to the absence of the one-off gain from FPSO Bunga Kertas booked in 1Q25. Concurrently, it said Petronas Dagangan Bhd 's earnings were forecast to decline 18.1% q-o-q, impacted by lower margins in its commercial segment amid volatility in jet fuel prices and higher product costs. 'That said, the overall weakness in the sector is expected to be partially offset by earnings recovery from Yinson Holdings Bhd and Dayang Enterprise Holdings Bhd . 'Overall, we project sector core net profit to contract by 6.3% year-on-year, setting a new decade-low earnings base. 'The downtrends, which has persisted since 2021, is largely attributed to a weaker order book, margin compression from weaker product spreads, cost provisions, and intermittent operational disruptions,' said CIMB Research. It added that PETRONAS' 1H25 financial results and capex update, expected by end-August or early September, would be key, although early signs point to downside risk for FY25 capex for the national oil and gas company, driven by delayed project rollouts amid volatile oil prices and regulatory conflict with Petros over gas distribution rights in Sarawak. CIMB Research pointed out that sentiment has been dampened by PETRONAS' cost rationalisation measures, including a downsizing plan impacting up to 10% of its 50,000 employees, alongside a hiring and promotion freeze through end-2026 that signals a more cautious approach to capital management. 'Based on news reports indicating a possible 30% impact on revenue, our back-of-the-envelope calculation suggests that PETRONAS' FY25 capex could be trimmed by up to RM6bil. 'This implies a possible downward revision to the RM44bil to RM54bil range, based on the national oil company's earlier guidance of maintaining annual capex between RM50bil and RM60bil.' For reference, CIMB Research reported that PETRONAS spent RM54.2bil in FY24, and that the likelihood of deferred work orders and potential contract renegotiations could negatively affect project timelines, earnings visibility, and profit margins of oil and gas companies that are dependent on PETRONAS contracts, such as Dayang and Dialog Group Bhd . Given its cautious sector outlook, CIMB Research is keeping a selective stance, continuing to favour MISC and Dialog, which it believes are well-positioned to deliver sustained outperformance over the medium term. Its target price for MISC is RM9.19 and RM2.50 for Dialog.
The Star
02-07-2025
- Business
- The Star
Bursa Malaysia trends higher, boosted by PETRONAS-linked stocks
KUALA LUMPUR: Bursa Malaysia trended higher in early trade on Wednesday, supported by gains in the energy sector, particularly PETRONAS-linked stocks, following a weaker start to the day. The FBM KLCI rose 2.99 points, or 0.19% to 1,544.52 at 9.16 am. It opened 1.8 points lower at 1,539.73 earlier. PETRONAS Dagangan and PETRONAS Gas rose 18 sen each to RM21.44 and RM17.68 respectively. Tong Herr Resources gained 14 sen to RM1.65 and MISC added 11 sen to RM7.66. F&N lost 30 sen to RM28.78, QL fell 10 sen to RM4.58, ViTrox declined nine sen to RM3.63 and Kuala Lumpur Kepong eased eight sen to RM21. Berjaya Research Sdn Bhd said that near-term market conditions remain positive and may nudge the key index higher, supported by mild bargain-hunting activities in some of the beaten-down sector leaders. As such, the research house said the portfolio realignment exercise could extend. However, the potential upsides may remain relatively modest due to the prevailing low market participation rate, with few noteworthy leads, which has left many market players on the sidelines. 'Investors are on the lookout for more clues on the U.S. tariffs but with the exemptions expiring next week, there is still little progress on the trade negotiations thus far. 'Meanwhile, the key index is at its 1,541 hurdle and the targets are now at the 1,544-1,548 levels, followed by the psychological level of 1,550 points. 'The supports, on the other hand, are at 1,535 points and 1,527 points respectively,' Berjaya Research said. Meanwhile, Rakuten Trade noted that the FBM KLCI closed higher on Tuesday, attributing the rise to some accumulation by foreign funds. 'It is interesting to see that net foreign inflows have already taken place over the past few days. 'Therefore, we expect the index to hover between the 1,540-1,550 range today,' it added.
