PETGAS (6033) : Petronas Gas - Pengerang regas terminal is on
Target RM27.11 (Stock Rating: ADD)
PetGas announced that it will undertake the Pengerang regasification terminal project with Dialog and the Johor state government. The total project would cost RM2.7bn, of which PetGas’s portion would be approximately RM2bn. The new regasification terminal will be completed in 4QFY17 and we expect stable earnings contribution from the terminal to start in FY18. While we make no changes to FY14-16 earnings forecast, we raise our SOP-based target price to RM27.11 (from RM26.44 previously) as we imputed the contribution of the regasification terminal towards the earnings and cashflow for FY18 onwards. We maintain our Add call on the stock.
What Happened
PetGas announced that it has entered into a shareholder's agreement with Dialog for the formation of a JV company to undertake the development of a regasification terminal in Pengerang. The total project cost would be approximately RM2.7bn. The JV company, Pengerang LNG (Two) Sdn Bhd (PLNG2), would be 65%-owned by PetGas, 25% by Dialog and the remaining 10% by the investment arm of the Johor state government. PetGas’s portion of the project amounts to approximately RM2bn. The regasification terminal is expected to be completed by 4QFY17.
What We Think
We are not surprised by the developments as PetGas indicated that it would make an announcement on the regasification terminal project in 2014. As we had previously highlighted, management guided that the regasification terminal (similar size to PetGas's existing terminal in Melaka that has capacity of 3.5mt p.a.) is likely increase PetGas’s earnings in FY18 onwards by 10-11% once it is completed. However, we estimate that PetGas’s earnings in FY18 onwards would see a more conservative uplift of 7-8%, after taking into account the minority interests as PetGas only owns 65% of the terminal. We have not imputed any contribution from the regasification terminal into our FY14-16 EPS forecasts yet, as the earnings contribution is beyond our current forecast horizon.
What You Should Do
We think that the announcement is positive for PetGas as the new regasification terminal would provide more stable long-term earnings to supplement its existing earnings stream. We maintain our Add call on the stock, with a new target price of RM27.11 after we imputed the earnings contribution from the new terminal.
Source: CIMB Daybreak - 17 November 2014
Target RM27.11 (Stock Rating: ADD)
PetGas announced that it will undertake the Pengerang regasification terminal project with Dialog and the Johor state government. The total project would cost RM2.7bn, of which PetGas’s portion would be approximately RM2bn. The new regasification terminal will be completed in 4QFY17 and we expect stable earnings contribution from the terminal to start in FY18. While we make no changes to FY14-16 earnings forecast, we raise our SOP-based target price to RM27.11 (from RM26.44 previously) as we imputed the contribution of the regasification terminal towards the earnings and cashflow for FY18 onwards. We maintain our Add call on the stock.
What Happened
PetGas announced that it has entered into a shareholder's agreement with Dialog for the formation of a JV company to undertake the development of a regasification terminal in Pengerang. The total project cost would be approximately RM2.7bn. The JV company, Pengerang LNG (Two) Sdn Bhd (PLNG2), would be 65%-owned by PetGas, 25% by Dialog and the remaining 10% by the investment arm of the Johor state government. PetGas’s portion of the project amounts to approximately RM2bn. The regasification terminal is expected to be completed by 4QFY17.
What We Think
We are not surprised by the developments as PetGas indicated that it would make an announcement on the regasification terminal project in 2014. As we had previously highlighted, management guided that the regasification terminal (similar size to PetGas's existing terminal in Melaka that has capacity of 3.5mt p.a.) is likely increase PetGas’s earnings in FY18 onwards by 10-11% once it is completed. However, we estimate that PetGas’s earnings in FY18 onwards would see a more conservative uplift of 7-8%, after taking into account the minority interests as PetGas only owns 65% of the terminal. We have not imputed any contribution from the regasification terminal into our FY14-16 EPS forecasts yet, as the earnings contribution is beyond our current forecast horizon.
What You Should Do
We think that the announcement is positive for PetGas as the new regasification terminal would provide more stable long-term earnings to supplement its existing earnings stream. We maintain our Add call on the stock, with a new target price of RM27.11 after we imputed the earnings contribution from the new terminal.
Source: CIMB Daybreak - 17 November 2014
