COMMENTS ON PETRONAS GAS BHD (6033)

FIGURE 1: PETRONAS GAS BHD LAST 2 YEARS SHARE PRICE TREND

**analysis based on 2018 annual report.

1.       GENERAL INTRO: PETRONAS GAS (PETGAS) is one of the main utilities and natural gas processing and transportation companies in Malaysia.

2.       NOTABLE POINTS:

a.       In 2018 report, PETGAS exceeded last year’s record revenue by 12% to hit RM5.5 billion and achieved profit for the year of RM1.9 billion, the highest ever in history.

b.      Gas Processing segment achieved its best performance in five years, with 100% product delivery reliability for sales gas, propane and butane. Operational reliability for sales gas averaged 99.98%, propane 99.1%, ethane 99.7% and butane 99.1%. Such high levels of efficiency led to revenue of RM1.6 billion, equivalent to 29% of the Group’s total.

c.       Gas Transportation segment (GT) recorded zero supply curtailment, 100% sales gas delivery, and world class reliability as well as availability at 99.99% and 99.91% respectively. GT transported and supplied an average of 2,122 mmscfd of sales gas within Peninsular Malaysia. In Sabah and Sarawak, where the Group operates the Sabah-Sarawak Gas Pipeline (SSGP), despite the challenges on the geohazard, the Group transported an average of 268 mmscfd of salesgas. Revenue for the year stood at RM1.4 billion, contributing to 25% of the Group’s total.

d.      Regasification segment maintained its 100% Overall Equipment Effectiveness (OEE) record, while at RGTP the Group successfully commissioned the second tank ahead of schedule, in April, increasing the regasification plant’s total storage capacity to 400,000 m3. Regasification achieved a 61.0% increase in revenue to RM1.2 billion in FY 2018.

e.      Utilities business segment also recorded its best performance for the last five years, achieving 99.6% reliability for both electricity and steam respectively, and 98.9% reliability for industrial gases. The division achieved RM1.3 billion in revenue in FY2018.

3.       IS THIS COUNTER A STRONG GROWTH STOCK? 

a.       REVENUE RANGE (RM million): 5,498 million as reported in 2018 annual report, this is a high revenue company.

b.      SHARE PRICE: from 2018-2020, share price ranged from ~ RM15.00 to RM19.00.

c.       EARNING PER SHARE (EPS): earning per share in last 5 years was steady, ranging from 87.9 to 100.4sen

d.      FUTURE POTENTIAL/PROSPECTS: share price expect to be stable in the next few years

e.      CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 1,049.5 million, around 5% of total assets.

4.       IS THIS A STRONG DIVIDEND STOCK?     

a.       DIVIDEND YIELD: in 2018 financial year, PETGAS declared a dividend payout of 72 sen per share to shareholders, which amounts to a dividend yield of 4.36%.

b.      DIVIDEND PAYOUT RATIO: Hence, in 201 financial year, PETGAS paid out 78% of its earnings to shareholders in the form of dividend.

c.       CONSISTENCY: the dividend payout was consistent, the dividend paid to shareholders in the last five years increased from 55 to 72 sen.

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2018 financial year, PETGAS reported a good return of shareholders’ equity, at 14.3%.

b.      COST-TO-INCOME RATIO: cost-to-income ratio is moderate, at 133%.

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 3,616 million, equivalent to RM 1.83 per share.

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is very well supported by institutional investors, there are 30 institutional investors at top 30 major shareholders list, including EPF (8.73%), PERMODALAN NASIONAL BERHAD (0.35%), SKIM AMANAH SAHAM BUMIPUTERA (3.65%), KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (4.4%), SOCSO (0.18%) and insurance companies/investment funds. Its major shareholders is PETRONAS (60.66%).

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