PP 7767/09/2010(025354)

12 May 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su l ts N o t e
12 May 2010
MARKET DATELINE

Petronas Gas Share Price

Fair Value
:
:
RM9.88
RM10.71
No Surprises Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (PETGAS; Code: 6033) Bloomberg: PTG MK

Net Net
FYE Turnover profit EPS Growth PER C.EPS* P/CF P/NTA Gearing ROE GDY

Mar (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (x) (%) (%)
2010 3,221.8 940.7 47.5 1.4 20.8 50.0 12.5 3.0 Net cash 11.3 5.1
2011f 3,308.3 1,238.2 62.6 31.6 15.8 60.0 10.7 3.1 Net cash 14.5 6.8
2012f 3,348.2 1,273.6 64.4 2.9 15.3 63.0 10.4 3.1 Net cash 14.5 6.9
2013f 3,411.3 1,324.8 67.0 4.0 14.8 63.0 10.1 3.2 Net cash 14.5 7.2
Main Board Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ No surprises. Petronas Gas reported 4QFY03/10 revenue of RM802.2m (- RHBRI Vs. Consensus
Above
1% qoq, -14% yoy) due mainly to lower contribution from sales of utilities
In Line
stemming from lower production activities in Kertih petrochemical plants.
Below
Nevertheless, FY03/10 pre-tax profit was higher due to lower operating
costs and higher ASP (given the revised pricing with customers beginning Issued Capital (m shares) 1,978.7
Jan 09) for its CUF sales, resulting in EBIT margin rising to 37.6%, from Market Cap(RMm) 19,549.9
35% in FY03/09. Overall, FY03/10 net profit of RM940.9m accounted for Daily Trading Vol (m shs) 1.1
98% and 95% of our full-year forecast and market consensus respectively. 52wk Price Range (RM) 9.20-10.40
Major Shareholders: (%)
♦ Growing emphasis on the transportation business. We highlight the Petronas 60.6
key driver for the revised GPTA is to tap into the growth potential of the KWAP 14.9
gas transportation business arising from higher demand for processed gas EPF 12.1

transmission (vs. unprocessed gas from offshore Peninsular Malaysia) over

FYE Mar FY11 FY12 FY13
the long term. We believe the clear demarcation between processing and EPS chg (%) 2.3 2.4
transmission fees would enable P Gas to grow its transmission-based Var to Cons (%) 4.3 2.2 6.3
business to offset declining earnings from gas processing business
stemming from lower gas output from Peninsular Malaysia. PE Band Chart

PER = 23x
♦ Risks. 1) Rising costs of operation, including plant maintenance, materials PER = 21x
PER = 19x
and manpower; and 2) Deferred returns from investments in the Sabah PER = 17x
IPP, and potentially in overseas pipeline businesses.

♦ Forecasts. Our FY11-12 earnings estimates are raised by 2.3% and 2.4%
after updating our profit model. We have introduced FY03/13 earnings
estimate.

♦ Defensive play. In line with our expectation, the company declared a final Relative Performance To KLCI

dividend of 35 sen/share, bringing gross DPS to-date to 50 sen or yield of FBM KLCI
5.1%.

♦ Investment case. We have tweaked upwards slightly our fair value to

RM10.71 (from RM10.51 previously) after our earnings revision. Petronas Gas
Notwithstanding lower throughput processing fees for its domestic
operation, we believe Petronas Gas still offers relatively secure earnings,
guaranteed by the Reservation Charge, and this will also underpin dividend
payouts. Therefore, we believe annual dividend yields of 6-7% p.a. will
likely continue to support the share price. Hence, we are reiterating our Wong Chin Wai
Market Perform call on the stock. (603) 92802158
wong.chin.wai@rhb.com.my

Yap Huey Chiang

Please read important disclosures at the end of this report. (603) 92802171
yap.huey.chiang@rhb.com.my

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 12 May 2010

Table 2. Petronas Gas Quarterly Results

QoQ YoY YoY
FYE Mar (RMm) 4Q09 3Q10 4Q10 FY09 FY10 Comments
(%) (%) (%)
671.4 609.3 625.4 3 (7) 2,658.0 2,475.0 (7)
Throughput Throughput revenue guaranteed by the
services Reservation Charge, with potential
upside if the throughput volume is
higher than 2.4mmscfd
264.4 201.6 176.8 (12) (33) 757.2 746.8 (1)
Utilities Qoq and yoy decline in CUF sales due
to lower production activities in Kertih
petrochemical plants
935.9 810.9 802.2 (1) (14) 3,415.1 3,221.8 (6)
Turnover

255.2 254.4 250.9 (1) (2) 1,092.6 1,025.5 (6)

Throughput Qoq and yoy decline due to higher
services operating costs.
85.5 57.0 19.2 (66) (78) 128.2 152.8 19
Utilities Qoq and yoy decline due to lower
utilisation rates
(3.4) 21.2 1.8 (91) (154) (25.4) 33.5 (232)
Other inc/exp
337.3 332.6 272.0 (18) (19) 1,195.4 1,211.8 1
EBIT Qoq and yoy lower due to lower
contribution from sales of utilities
36.0 41.0 33.9 35.0 37.6
Margin (%)

(5.1) (5.0) (4.6) (8) (10) (19.4) (20.2) 4

Int expense Net cash of RM1,744m as at Mar 10,
vs. RM1,398m as at Dec 09
14.7 15.7 10.2 (35) (31) 55.5 52.2 (6)
Associate Qoq and yoy decline due to lower
contribution from Gas Malaysia
346.9 343.3 277.5 (19) (20) 1,231.4 1,243.8 1
PBT Filtered down from EBIT and dragged
down by weaker contribution from
associate
(85.7) (77.4) (75.4) (3) (12) (303.4) (303.1) (0)
Tax
24.7 22.5 27.2 24.6 24.4
Eff. rate (%)

- (0.6) (0.7) 21 (1.6) n.m

MI
261.2 266.5 202.8 (24) (22) 928.0 942.3 2
Net profit
13.2 13.5 10.2 31 (22) 46.9 47.6 2
Net EPS (sen)

35.0 35.0
Gross DPS (sen)
Source: Company, RHBRI

Table 3. Earnings Forecasts Table 4. Forecast Assumptions

FYE Mar (RMm) FY10 FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F
Throughput services 2,475.0 2,446.6 2,472.1 2,498.9 Res. Charge (RMm/mth) 103.5 103.5 103.5
Utilities 746.8 751.7 786.1 822.4 Flowrate 1 (RM/mmscfd) 0.22 0.22 0.22
Others - 110.0 90.0 90.0 Flowrate 2 (RM/mmscfd) 0.22 0.22 0.22
Turnover 3,221.8 3,308.3 3,348.2 3,411.3 Annual vol. (bn scf) 1.02 1.04 1.05
Growth (%) -5.7 2.7 1.2 1.9

EBITDA 1,855.1 2,251.4 2,302.2 2,370.2 Source: Company data, RHBRI estimates
Margins (%) 57.6 68.1 68.8 69.5
Depreciation (643.3) (652.3) (661.3) (670.3)
Net interest exp (20.2) (16.3) (16.3) (16.3)
Associate 52.2 67.0 71.5 79.0
Pre-tax profit 1,243.8 1,649.8 1,696.0 1,762.5
Taxation (303.1) (411.5) (422.4) (437.7)
Eff. tax rate (%) 24.4 24.9 24.9 24.8
Net profit 940.7 1,238.2 1,273.6 1,324.8

Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

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Industry/Sector Ratings

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