PetGas 4Q earnings above expectations, says MIDF Research

KUALA LUMPUR (Feb 19): Petronas Gas Bhd's (PetGas) earnings for the fourth quarter ended Dec 31, 2019 (4QFY19) came in above expectations, according to MIDF Research.

In a research note today, MIDF Research said PetGas recorded a net profit of RM485.3 million in 4QFY19, bringing its FY19 cumulative earnings to RM1.95 billion, which was above the research house’s full-year earnings estimates at 106.1% but within consensus’ estimates at 103.2%.

It said PetGas earnings was boosted by higher revenue from gas processing and utilities as well as a higher contribution from Kimanis Power during the quarter.

Going forward, it believed PetGas would continue to perform, premised on strong and diversified income stream, expected moderate national gross domestic product growth of 4.5% for 2020 and strong potential capital upside, despite the recent revision implementation of the Incentive Based Regulation pricing mechanism.

“We are maintaining our “Neutral” recommendation on PetGas with an unchanged target price of RM17.62,” it said.

It said the neutral recommendation is due to the gradual migration of PetGas’ asset base from the current depreciated replacement cost to regulated asset base, which could impact its earnings.

At 3.20pm, PetGas shares rose 12 sen to RM16.50 with 956,700 shares changing hands.