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ELEVATED oil prices and subsequently higher product costs are not putting the brakes on Petronas Dagangan Bhd's expansion plans. The company is set to open its milestone 1,000th petrol station this month as it accelerates efforts to become Malaysia's No.1 petroleum retailer in two to four years.
Petronas Dagangan aims to become Malaysia’s No.1 petroleum retailer in two to four years . – Reuters
We continue to value Petronas Dagangan at 18.6 times for calendar year 2013 price-to-earnings (P/E), a 40% premium to our target market P/E of 13.3 times to reflect its earnings visibility and attraction as a growth and dividend stock. Petronas Dagangan remains an “outperform”, supported by the prospect that it could be the all-round leader in Malaysia in four years' time.
Bernama, quoted Petronas Dagangan's senior general manager (retail trade) Akbar Md Thayoob as saying that the company was focused on growing its network to 1,000 petrol stations by the end of this month. Petronas Dagangan was eyeing total sales of five billion litres of petrol this year (increase 10% year-on-year), driven by the increase in its number of petrol stations.
This aggressive retail expansion is in line with management's guidance and our projection. The opening of the landmark 1,000th station is definitely within reach given that it had added 12 new stations in the first half of 2012, bringing its total to 980. The company plans to add a record 74 new stations to its retail network by year-end, more than doubling its annual average of 30 new stations. We expect the company to close financial year ending Dec 31, 2012 with 1,042 stations.
Petronas Dagangan's retail market share stands at 31%. Its hard-hitting growth strategy is aimed at taking over Malaysia's retail leadership from Shell, which has 35% of the market measured by sales volume. Petronas Dagangan also trails Shell in the lubricant market but beats the competition in liquefied petroleum gas and commercial. It targets wresting the lubricant market top spot from Shell in four years' time.
Stay invested as Petronas Dagangan offers both growth and dividends. Planned retail expansion supports our forecast of new net profit highs during 2012 to 2014 and a three-year earnings per share compound annual growth rate of 17.2%.
A 50% dividend policy with quarterly payments adds to the appeal.