27-05-2025
Defensive earnings profile to support PetGas
Kenanga Research expects PetGas' 2Q25 numbers to be on the weak side.
PETALING JAYA: Analysts generally have a constructive view of Petronas Gas Bhd (PetGas) despite it having to absorb at least a RM170mil charge to rehabilitate the Putra Heights area following the pipeline fire incident in April.
CGS International (CGSI) Research stated PetGas' defensive earnings profile, underpinned by its ownership of gas infrastructure assets in Malaysia, remained a key strength that is backed by a healthy balance sheet.
'Visible free cash flow and dividend yields of over 4% support the sustainability of its payouts (dividends),' the research house stated in its latest report on PetGas.
It added the RM170mil estimated charge represented 1.2% of PetGas' current book value and 9% of 2025 forecast net profit.
CGSI Research has maintained a 'hold' call on PetGas with an unchanged discounted cash flow based target price (TP) of RM17.50 a share.
Kenanga Research noted that while PetGas' first quarter (1Q25) financial results were slightly below expectations, the company's regulated asset base continues to provide resilient earnings visibility.
The research house, however, expected PetGas' 2Q25 numbers to be on the weak side.
This is due to the operational disruptions following the Putra Heights fire incident.
'We fine-tune our financial year 2025 (FY25) and FY26 earnings forecast lower by 5% and 3%, respectively, to reflect the guided RM60mil profit impact in FY25, to incorporate adjustments to gas transportation and regasification terminal tariffs and some housekeeping,' Kenanga Research added.
It has a 'market perform' call on PetGas with a lower TP of RM16.80 a share.
PetGas posted a 1Q25 core profit of RM466.2mil on the back of RM1.6bil in revenue.
It announced a first interim dividend of 16 sen a share for the quarter.
MIDF Research, however, downgraded the counter to 'neutral' with a TP of RM18.67 a share on the ground that all factors that could impact the company's share price had been priced in.
It expected PetGas' FY25 performance to remain stable and resilient despite the operational setback caused by the pipeline incident.
'With higher demand for natural gas and liquefied natural gas, in tandem with the higher prices projected in 2025, all of PetGas' businesses will continue to perform on the positive.
'In line with the incident, we expect PetGas will strengthen its risk management, operational efficiency, and mitigation strategies,' MIDF Research said.
Its TP on PetGas is pegged to a price earnings multiple of 19 times to the revised earnings per share for FY25 of 98 sen.
