KUALA LUMPUR (May 8): CIMB Research has maintained its “Hold” rating on Gas Malaysia Bhd at RM2.62 with a lower target price of RM2.81 (from RM3.03) and said Gas Malaysia's 1Q15 core net profit of RM28.5 million was below expectations at 20% and 22% of house and consensus’s full-year forecasts, respectively.
In a note today, the research house said the main reason for the variance was the higher-than-expected operating costs due to higher gas costs.
“Given the weaker-than-expected results, we cut our FY15-16 earnings forecasts by 7-10% per annum.
“As a result of the earnings cut, our target price is reduced to RM2.81 from RM3.03 previously, based on an unchanged 22x FY16 P/E, a 20% discount to Petronas Gas Bhd's valuations.
“We maintain our view that Gas Malaysia's earnings are at risk given the higher portion of LNG that it will utilise. Thus, we maintain our Hold call on the stock. We prefer PetGas instead,” it said.