Petronas Gas sees brighter prospects from LNG regasification

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BRIGHTER PROSPECTS: LNG vessels berthing at Petronas Gas’ regasification terminal platforms. Petronas Gas’ prospects have been viewed as bright on the back of the commencement of its LNG regasification terminal business in Melaka.

KUCHING: Petronas Gas Bhd’s (Petronas Gas) prospects have been viewed as bright on the back of the commencement of its liquified natural gas (LNG) regasification terminal business in Melaka, Malaysia’s first LNG regasification terminal.

In addition, the group received a leg-up in its growth as the one-off investment tax allowance for its LNG regasification terminal business had more than doubled the group’s 2Q net profit.

Analyst Aaron Tan from the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) in a recent note, said stripping out its one-off tax allowance boost, Petronas Gas’ first half 2013 (1H13) grew at a modest 3.1 per cent year-on-year (y-o-y) while its core earnings shrank 9.9 per cent y-o-y to RM713.8 million.

However, he noted that the group’s drop in earnings, compared with 1H12, was due to the RM100 million gain on disposal of its shareholdings in Gas Malaysia Bhd (via initial public offering in June 2012).

While the regasification segment for 2Q13 had posted a net loss of RM2.8 million, Tan outlined that this loss was mainly attributable to pre-operating expenses.

He further highlighted, “We expect the regasification business to contribute more substantially to Petronas Gas in financial year 2013 (FY13) and FY14 with an estimated additional RM80 million to RM115 million in net profit per
annum.”

Meanwhile, on the group’s other business segments, the analyst noted that the group’s gas transportation revenue for 1H13 increased by RM24.4 million to RM580.9 million. This was caused by higher capacity booked by customers.

“In-line with the increase in revenue, segment operating profit grew 5.3 per cent y-o-y, supported by margin expansion of 0.7 percentage points to 79.6 per cent,” Tan added.

As for its utilities division, he said the six month segment revenue remained relatively stable with a slight uptick of 0.3 per cent y-o-y.

“This is due to higher revenue from industrial gases, dematerialised water and steam and partially negated by lower revenue from electricity.

“However, operating profit shot up 21.4 per cent y-o-y, attributable to lower depreciation expense from property, plant and equipment (PPE) review,” he further noted.

On Petronas Gas’ gas processing segment, the analyst explained that the 1H13 segment revenue fell 1.8 per cent y-o-y due to lower performance based structure income resulting from lower export volume for propane and lower realised price for both propane and butane.

However, he noted, operating profit increased 9.5 per cent y-o-y on the back of operating margin expansion of 5.8 percentage points due to lower depreciation expenses.

In a separate note, RHB Research Institute Sdn Bhd opined that Petronas Gas’ earnings should remain stable for the remainder of the year, underpinned by its fixed fee structure under the Gas Processing and Transmission Agreement (GPTA).

To note, Petronas Gas is currently under the fourth GPTA for its Peninsular Gas Utilisation pipeline.