Friday 29 Mar 2024
By
main news image

Petronas Gas Bhd
(Nov 17, RM21.60)
Maintain “buy” with unchanged target price (TP) of RM28.60:
PetGas has entered into a 65:25:10 joint venture agreement with Dialog Group Bhd and State Secretary of Johor to develop a new regasification plant at the Pengerang Deep Water Terminal, Johor. The regas plant will have a capacity of 3.5 million tonnes per annum (mtpa) at an estimated cost of RM2.7 billion, which is in line with management’s guidance. The joint venture will also provide opportunities for the development of new regas facilities at other strategic locations.

The new Pengerang regas plant is part of Petroliam Nasional Bhd’s refinery and petrochemical integrated development (Rapid). The regas plant will consist of a regasification terminal which will function to receive, process and store liquefied natural gas (LNG) unloaded from LNG carriers. The LNG will be mainly supplied to the Pengerang Integrated Complex within Rapid for its fuel requirements.

In addition, the gas will be injected into PetGas’ Peninsular Gas Utilisation pipeline system for other users and also towards the national energy security supply.

The project will commence construction by the second quarter of 2015 (2Q15) and should achieve commercial operations by 4Q17. PetGas’ portion of the project cost is RM2 billion, to be funded by a combination of equity and debt. Assuming a similar return to PetGas’ existing regas plant in Melaka, we expect a 7% per annum earnings enhancement for PetGas from financial year 2018 (FY18F). The group’s gearing will increase slightly to 0.1 times from FY17F  due to the additional borrowings for the new regas plant.

Maintain “buy” for Petgas for its promising outlook, supported by rising gas demand, a solid balance sheet, and strong parentage. We make no change to our discounted cash flow-derived TP of RM28.60 based on weighted average cost of capital of 8%. — AllianceDBS Research, Nov 17

Petronas-Gas_theedgemarkets

 

This article first appeared in The Edge Financial Daily, on November 18, 2014.

      Print
      Text Size
      Share