KUALA LUMPUR: HwangDBS Vickers Research has maintained its ‘buy’ call on Gas Malaysia despite its share price rising 14 per cent over the last two months, saying there is more upside given the promising prospects arising from growing gas demand.
“We raised our discounted cash flow (DCF)-derived target price to RM3.55 per share after adjusting for higher terminal growth rate of six per cent in our DCF model to reflect upside from Liquefied Natural Gas supply from the joint venture with IEV Energy and Melaka Regas Plant,” it said in a research note today.
The group has not declared a dividend for the first quarter of 2013 but the net yield is expected to be sustainable at four per cent based on 95 per cent payout ratio, supported by strong free cash flow and balance sheet, Hwang DBS said.
As at March 2012, Gas Malaysia’s net cash stood at RM373 million.
Meanwhile, Kenanga Research has maintained its ‘outperform’ call on Gas Malaysia, saying it considers the first quarter results to be in line as the first quarter is a seasonally low quarter while a strong second half is expected on the back of new gas supply from the Melaka RGT in July.
“The new 40 million standard cu ft per day (mmscfd) gas supply from Melaka RGT in July will be the earnings catalyst for the company, which will bring around 10 per cent increase in the gas supply.
“The subsequent 30 mmscfd and 40 mmscfd additional gas supplies from the same Melaka RGT in January 2014 and January 2015 respectively will ensure consistent earnings growth post 2013,” it said in another research note.– BERNAMA