OIL & GAS

PETRONAS GAS
(PTG MK EQUITY, PGAS.KL)

11 Feb 2016

Lahad Datu RGT aborted

HOLD

Company report

(Maintained)

Alex Goh
alexgoh@ambankgroup.com
Rationale for report: Company update

03-2036 2280
Price
Fair Value
52-week High/Low

Investment Highlights

RM22.32
RM24.40
RM23.98/RM20.20

Key Changes
Fair value
EPS

YE to Dec

FY14

FY15F

FY16F

FY17F

4,391.7
1,843.2
93.1
(11.3)
55.0
24.0
15.4
2.5
17.7
2.3

4,518.9
1,779.8
89.9
(3.4)
1,815
60.0
24.8
14.4
2.7
16.4
nm

4,637.0
1,848.8
93.4
3.9
1,866
62.0
23.9
13.8
2.8
16.2
nm

4,732.6
1,906.7
96.4
3.1
1,906
65.0
23.2
13.2
2.9
15.8
nm

Revenue (RM mil)

Core net profit (RM mil)
FD Core EPS (sen)
FD Core EPS growth (%)
Consensus Net Profit (RM mil)
DPS (sen)
PE (x)
EV/EBITDA (x)
Div yield (%)
ROE (%)
Net Gearing (%)

Stock and Financial Data

Shares Outstanding (million)

Market Cap (RMmil)
Book Value (RM/share)
P/BV (x)
ROE (%)
Net Gearing (%)

1,978.7
44,165.3
5.32
4.2
17.7
2.3

Major Shareholders

Petronas (60.7%)
EPF (12.1%)
Kumpulan Wang Persaraan (5.6%)
13.0
26.4

Free Float
Avg Daily Value (RMmil)
Price performance

3mth

6mth

12mth

Absolute (%)
Relative (%)

(2.6)
(0.2)

2.5
4.9

1.1
11.5

30.0

2,000

1,800
25.0

1,600
1,400

20.0

1,200
15.0

1,000
800

10.0

600
400

5.0

200
0.0
Feb-11

0
Feb-12

Feb-13
PTG MK

Feb-14

Feb-15

FBMKLCI Index

We maintain our HOLD rating on Petronas Gas (PGas)

with an unchanged fair value of RM24.40/share, based on
our sum-of-parts valuation. This implies an FY16F PE of
26x.
PGas and Sabah Energy Corp have mutually decided to
terminate the proposed regasification terminal (RGT) at
Lahad Datu, Sabah following prolonged uncertainties
concerning the project.
On September 2013, PGas had offered Sabah Energy to
acquire up to a 20% equity stake in the project, which was
expected to be smaller than the 530mil mmscfd Melaka
RGT.
The Star reported that the facility, which would have a
send-out capacity of 0.76mil tonnes per annum vs. the
Melaka RGTs 3.8mil tonnes, we earlier scheduled for
completion in 2015.
However, the Lahad Datu insurgency in February 2013 led
to an indefinite suspension of the project. Hence, security
concerns and the current low crude oil prices
environment are likely to be main reasons for the project
abortion.
Our fair value and forecasts are unchanged as we had not
incorporated any contributions from the proposed Lahad
Datu regasification terminal, given that management had
not given any guidance of when the project would have
commenced.
The groups next phase of growth will be contributed by
the groups second LNG regasification plant in
Pengerang, recently announced and targeted to be
operational by 4QFY17.
As the Pengerang RGTPs capacity is similar to the
existing Malacca regasification facilitys 530mil mmscfd,
we expect the Pengerang RGTP to contribute
approximately RM300mil per annum to the groups EBIT
upon commencement of operations.
PGas will also be involved in the development of an air
separation unit in a JV with Linde, which is expected to
be used for the production of oxygen and nitrogen. A
final investment decision is expected to be reached by
3QFY15 and it is targeted to be completed by 4QFY18.
The stock currently trades at an FY15F PE of 24x below
its 2-year peak of 25x, while dividend yield remains
decent at 2-3%.

Petronas Gas

11 Feb 2016

EXHIBIT 1: PB BAND CHART

EXHIBIT 2: PE BAND CHART

30.00

5.00
4.50
4.00
3.50

+1
Avg
-1

+1

25.00

Avg
-1

20.00

3.00
2.50

15.00

2.00
1.50
1.00

10.00

5.00

0.50

AmInvestment Bank Bhd

Jan-16

Jul-15

Oct-15

Apr-15

Jan-15

Jul-14

Oct-14

Apr-14

Jan-14

Jul-13

Oct-13

Apr-13

Jan-13

Jul-12

Oct-12

Apr-12

0.00
Jan-12

0.00

Petronas Gas

11 Feb 2016

EXHIBIT 3: FINANCIAL DATA

Income Statement (RMmil, YE 31 Dec)

FY13

FY14

FY15F

FY16F

FY17F

3,892.1
2,585.8
(723.9)
1,862.0
42.8
(8.3)
1,896.4
182.5
2,078.9
2,078.9

4,391.7
2,892.1
(786.9)
2,105.2
288.7
(39.4)
2,354.5
(512.4)
1.1
1,843.2
1,843.2

4,518.9
3,027.7
(788.5)
2,239.2
126.8
(24.1)
2,341.9
(562.1)
1,779.8
1,779.8

4,637.0
3,106.8
(810.5)
2,296.3
134.0
2.3
2,432.6
(583.8)
1,848.8
1,848.8

4,732.6
3,170.8
(832.5)
2,338.4
141.0
29.4
2,508.8
(602.1)
1,906.7
1,906.7

FY13

FY14

FY15F

FY16F

FY17F

10,611.1
934.1
11,545.2
927.1
38.6
711.5
1,677.2
1,014.4
17.7
107.3
1,139.5
824.1
993.3
1,817.4
10,265.7
(0.2)
5.19

10,858.5
1,112.2
11,970.6
637.7
43.4
608.7
1,289.8
668.2
21.0
99.9
789.1
861.2
1,041.1
1,902.3
10,533.9
35.1
5.32

10,570.0
1,232.8
11,802.8
1,538.2
44.6
626.4
2,209.2
687.5
109.6
797.1
960.1
1,093.2
2,053.3
11,126.5
35.1
5.62

10,259.5
1,360.2
11,619.7
2,406.6
45.8
642.7
3,095.1
705.5
113.9
819.4
964.1
1,147.8
2,111.9
11,748.4
35.1
5.94

9,927.0
1,494.1
11,421.2
3,291.0
46.8
656.0
3,993.7
720.0
117.4
837.5
968.1
1,205.2
2,173.3
12,368.9
35.1
6.25

FY13

FY14

FY15F

FY16F

FY17F

1,896.4
723.9
(8.8)
(1,049.4)
1,562.1
(1,000.0)
(1,000.0)
(1,088.3)
(1,088.3)
(526.2)
1,878.2
85.3

2,354.5
786.9
(240.6)
(730.0)
2,170.7
(500.0)
(500.0)
(1,088.3)
(1,088.3)
582.4
619.9
628.3

2,341.9
788.5
10.2
(630.4)
2,510.1
(500.0)
(500.0)
(1,187.2)
(1,187.2)
822.9
85.3
1,427.0

2,432.6
810.5
4.7
(683.4)
2,564.3
(500.0)
(500.0)
(1,226.8)
(1,226.8)
837.5
(244.5)
2,266.9

2,508.8
832.5
3.9
(735.8)
2,609.4
(500.0)
(500.0)
(1,286.2)
(1,286.2)
823.2
578.1
3,119.5

Key Ratios (YE 31 Dec)

FY13

FY14

FY15F

FY16F

FY17F

Revenue growth (%)

EBITDA growth (%)
Pretax margin (%)
Net profit margin (%)
Interest cover (x)
Effective tax rate (%)
Dividend payout (%)
Debtors turnover (days)
Stock turnover (days)
Creditors turnover (days)

8.8
12.1
48.7
53.4
223.6
9.6
52.4
54
4
89

12.8
11.8
53.6
42.0
53.4
21.8
59.0
55
3
70

2.9
4.7
51.8
39.4
92.8
24.0
66.7
50
4
55

2.6
2.6
52.5
39.9
nm
24.0
66.4
50
4
55

2.1
2.1
53.0
40.3
nm
24.0
67.5
50
4
55

Revenue
EBITDA
Depreciation/Amortisation
Operating income (EBIT)
Other income & associates
Net interest
Exceptional items
Pretax profit
Taxation
Minorities/pref dividends
Net profit
Core net profit
Balance Sheet (RMmil, YE 31 Dec)
Fixed assets
Intangible assets
Other long-term assets
Total non-current assets
Cash & equivalent
Stock
Trade debtors
Other current assets
Total current assets
Trade creditors
Short-term borrowings
Other current liabilities
Total current liabilities
Long-term borrowings
Other long-term liabilities
Total long-term liabilities
Shareholders funds
Minority interests
BV/share (RM)
Cash Flow (RMmil, YE 31 Dec)
Pretax profit
Depreciation/Amortisation
Net change in working capital
Others
Cash flow from operations
Capital expenditure
Net investments & sale of fixed assets
Others
Cash flow from investing
Debt raised/(repaid)
Equity raised/(repaid)
Dividends paid
Others
Cash flow from financing
Net cash flow
Net cash/(debt) b/f
Net cash/(debt) c/f

Source: Company, AmInvestment Bank Bhd estimates

AmInvestment Bank Bhd

Petronas Gas

11 Feb 2016

EXHIBIT 4: SUM-OF-PARTS BREAKDOWN

Equity stake
Present v alue of PGas' operating cash flow s

100

Methodology
DCF at equity discount rate of

RMmil

46,334.8

96.0

500.8

1.0

168.0

0.3

569.8

1.2

555.6

1.2

74.0

0.2

85.3

0.2

48,288.3

100.0

8%, terminal grow th at 5%

Gas Malay sia

15

Market price

300MW Kimanis pow er plant

60

Project IRR

at

9%,

equity

discount rate of 9%, 80:20

Debt:equity
3.8million tonne capacity Melaka regassification facility -Package 2&3

100

Project IRR

at

9%,

equity

discount rate of 9% for RM1.8bil

of Package 2&3
490mmscfd Pengerang regasification facility

65

Project IRR

at

9%,

equity

discount rate of 9% for RM2.7bil

70km additional pipeline from PGU to Pengerang Integrated Complex

100

Project IRR

at

9%,

equity

discount rate of 6% for RM291mil

Net cash as at 31 Dec 2013
Total sum-of-parts (SOP)
No of shares
SOP value (RM/share)
Implied FY16 PE

1,978.7
24.40
26

Source: AmInvestment Bank Bhd

Published by
AmInvestment Bank Bhd (23742-V)
(A member of the Am Bank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this
report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a
solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd may from time to time have a position in or with
the securities mentioned herein. Members of the AmBank Group and their affiliates may provide services to any company and affiliates of
such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are
reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not
represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise
from the use of this report. All opinions and estimates included in this report constitute our judgement as of this date and are subject to
change without notice.

Printed by
AmInvestment Bank Bhd (23742-V)
(A member of the AmBank Group)
15th Floor Bangunan AmBank Group
55 Jalan Raja Chulan
50200 Kuala Lumpur
Tel: ( 0 3 ) 2 0 7 0 - 2 4 4 4 ( r e s e a r c h )
Fax: (03)2078-3162

AmInvestment Bank Bhd

For AmInvestment Bank Bhd

Benny Chew
SR VP Equity Research