KUALA LUMPUR (June 29): MIDF Research has upgraded Petronas Dagangan Bhd to a "buy" from "neutral" with a higher target price of RM23.88 (from RM22.01) after the company announced an additional six sales and purchase agreements with Petronas’ wholly-owned subsidiary PETCO Trading Labuan Company. 

This is in relation to the selling of working inventory and deadstock in the storage tank at the company’s selected fuel terminals for a total consideration of approximately RM132.9 million. 

In a research note on Wednesday (June 29), MIDF said this sale of inventories could assist in fulfilling the growing local demand for fuel oil as the impact of the Covid-19 pandemic on tourism, travelling and transportation had mostly diminished. 

Additionally, it said eliminating unfavourable Means of Platts Singapore price movements could rebalance fuel prices to more stable and fixed levels in case of ailing fuel prices in the rising inflation situation and tightened supply. 

“Nevertheless, key risks to this particular move are volatility in global crude oil prices, supply chain disruption and decreasing demand for fuel,” said the research house. 

MIDF opined that the sale proceeds will be used for Petronas Dagangan’s operational expenditure in the next financial period, hence it revises its earnings forecast for the financial year ending Dec 31, 2023 slightly upwards by 2.3%. 

Nonetheless, MIDF remains sanguine on the group’s future performance on the back of the positive atmosphere of the energy sector as a whole.

At 10.15am on Wednesday, shares in Petronas Dagangan were down two sen or 0.09% at RM21.66, giving the company a market capitalisation of RM21.52 billion.