Thursday, 7 November 2013

Petronas Dagangan hit by sharp drop in MOPS prices

Petronas Dagangan hit by sharp drop in MOPS prices
Posted on November 2, 2013, Saturday

KUCHING: Petronas Dagangan Bhd (Petronas Dagangan) saw softer third quarter (3Q) earnings growth at RM226.2 million, driven by lagged losses amid volatile Means of Platts Singapore (MOPS) prices especially in September.

However, according to HwangDBS Vickers Research Sdn Bhd (HwangDBS Research), the company is poised to see a better 4Q due to margin recovery as MOPS prices have stabilised in October.

To recap, Petronas Dagangan 3Q results showed a drop by seven per cent year-on-year (y-o-y) and an increase of 15 per cent quarter-on-quarter (q-o-q), bringing its nine months for 2013 (9M13) earnings to RM660.4 million (compared with RM660.3 million in 9M12).

“3Q13 bottomline was dragged (on a y-o-y basis) mainly by weaker margins (2.7 per cent versus 3Q12’s 3.2 per cent), hit by lagged losses amid volatile MOPS prices especially in September.

“At the topline, turnover grew to RM8.4 billionn in 3Q13 (12 per cent y-o-y and six per cent q-o-q) and RM24 billion (10 per cent y-o-y) in 9M13 as overall volumes sold rose 10.5 per cent year to date to 12.3 billion litres,” the research firm explained.

In terms of key segmental contributions, Petronas Dagangan’s retail business recorded revenue at RM3.8 billion, an increase of 11 per cent y-o-y and three per cent q-o-q.

HwangDBS Research noted that this is mainly due to sales volume growth of 9.7 per cent y-o-y and profit before tax (PBT) of RM174.5 million (a decrease of 23 per cent y-o-y and an increase of 103 per cent q-o-q) while the commercial division posted revenue of RM4.7 billion, which was an increase of 15 per cent y-o-y and five per cent q-o-q. Sales volume grew 12.6 per cent y-o-y with a PBT of RM88.1 million (an increase of 25 per cent y-o-y; a drop of 32 per cent q-o-q).

Petronas Dagangan declared an interim single-tier dividend per share (DPS) of 17.5 sen in 3Q13, bringing total net DPS to 44.1 sen for 9M13 (66 per cent payout).

“This is on track to meet our financial year 2013 forecast (FY13F) net DPS of 75 sen, assuming a further net DPS of 31 sen to be declared in 4Q13 (full year payout of 74 per cent).

“Meanwhile, we are keeping our FY13F net profit intact at RM1002.5 million (20 per cent y-o-y) as we penciled in a stronger 4Q13 due to margin recovery (as MOPS prices have stabilised in October),” HwangDBS Research opined.

It retained its target price of Petronas Dagangan at RM19.70 per share, based on 18-folds FY14F earnings per share (EPS), pegged to one standard deviation of mean.

“Although we like Petronas Dagangan’s resilient business model, its current valuations remain expensive at 28-folds FY14F EPS, more than two standard deviation above its historical mean,” the research firm commented.

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