PetDagang heading for a record quarter
Written by Financial Daily
Friday, 18 February 2011 11:36
Petronas Dagangan Bhd
(Feb 17, RM12.70)
Maintain outperform at RM12.50 with target price RM15.40:Petronas Dagangan’s (PetDagang) record quarterly net profit of RM236 million for 3QFY11 took 9M bottom line to an all-time high of RM641 million. At 73% of our full-year forecast, it met our expectations as we anticipate a stronger 4Q. However, at 82% of consensus numbers, it beat market expectations. The absence of an interim dividend was expected. We maintain our forecasts and continue to value the stock at our target market PER of 14.5 times, leading to an unchanged target price of RM15.40.
PetDagang remains an “outperform” based on the potential re-rating catalysts of:
(i) leadership in the retail and lubricant segments;
(ii) an overseas venture; and
(iii) earnings upgrades by the market.
Its 6.8% dividend yield, the highest in the sector locally and the second highest regionally, adds to the attraction.
Net profit in 3Q rose 26% year-on-year (y-o-y), thanks to an improvement in volume and margin supported by a bigger petrol station network and higher vehicle population. Furthermore, the steady movement of the oil price in October to December helped stabilise the selling prices of products that do not come under the automatic pricing mechanism. These positive factors boosted earnings before interest and tax (Ebit) margin to 5.5%, the highest since 1QFY10’s 5.8%.
The government raised the selling price of RON 95 petrol by 5 sen per litre in December while the price of RON 97 petrol was adjusted upwards
twice by 5 sen in November and 15 sen in December. However, the price increases did not have a major impact on sales volume as the increases were not unexpected.
Furthermore, the double hikes for RON 97 affected mostly high-end users with performance cars. An estimated 75% to 80% of motorists use RON 95, which is kept affordable at RM1.90 per litre. RON 97 retails at RM2.50 per litre.
PetDagang is Malaysia’s No 1 petroleum retailer. It is also tops in the commercial and LPG segments. However, the company still trails behind Shell in the retail and lubricant segments. Management targets to wrest the retail leadership position from Shell within three years. In the lubricant segment, where it is a late entrant, PetDagang aims to be the leader in five years.
PetDagang is currently mandated to operate only in Malaysia. However, this may change as management is mulling the possibility of operating outside Malaysia. In addition to the eventual reality of hitting a saturation point, we believe its interest in widening its market exposure may have been triggered by the likelihood of full deregulation of the domestic market. — CIMB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
http://www.theedgemalaysia.com/in-the-financial-daily/181818-petdagang-heading-for-a-record-quarter.html
Written by Financial Daily
Friday, 18 February 2011 11:36
Petronas Dagangan Bhd
(Feb 17, RM12.70)
Maintain outperform at RM12.50 with target price RM15.40:Petronas Dagangan’s (PetDagang) record quarterly net profit of RM236 million for 3QFY11 took 9M bottom line to an all-time high of RM641 million. At 73% of our full-year forecast, it met our expectations as we anticipate a stronger 4Q. However, at 82% of consensus numbers, it beat market expectations. The absence of an interim dividend was expected. We maintain our forecasts and continue to value the stock at our target market PER of 14.5 times, leading to an unchanged target price of RM15.40.
PetDagang remains an “outperform” based on the potential re-rating catalysts of:
(i) leadership in the retail and lubricant segments;
(ii) an overseas venture; and
(iii) earnings upgrades by the market.
Its 6.8% dividend yield, the highest in the sector locally and the second highest regionally, adds to the attraction.
Net profit in 3Q rose 26% year-on-year (y-o-y), thanks to an improvement in volume and margin supported by a bigger petrol station network and higher vehicle population. Furthermore, the steady movement of the oil price in October to December helped stabilise the selling prices of products that do not come under the automatic pricing mechanism. These positive factors boosted earnings before interest and tax (Ebit) margin to 5.5%, the highest since 1QFY10’s 5.8%.
The government raised the selling price of RON 95 petrol by 5 sen per litre in December while the price of RON 97 petrol was adjusted upwards
twice by 5 sen in November and 15 sen in December. However, the price increases did not have a major impact on sales volume as the increases were not unexpected.Furthermore, the double hikes for RON 97 affected mostly high-end users with performance cars. An estimated 75% to 80% of motorists use RON 95, which is kept affordable at RM1.90 per litre. RON 97 retails at RM2.50 per litre.
PetDagang is Malaysia’s No 1 petroleum retailer. It is also tops in the commercial and LPG segments. However, the company still trails behind Shell in the retail and lubricant segments. Management targets to wrest the retail leadership position from Shell within three years. In the lubricant segment, where it is a late entrant, PetDagang aims to be the leader in five years.
PetDagang is currently mandated to operate only in Malaysia. However, this may change as management is mulling the possibility of operating outside Malaysia. In addition to the eventual reality of hitting a saturation point, we believe its interest in widening its market exposure may have been triggered by the likelihood of full deregulation of the domestic market. — CIMB Research, Feb 17
This article appeared in The Edge Financial Daily, February 18, 2011.
http://www.theedgemalaysia.com/in-the-financial-daily/181818-petdagang-heading-for-a-record-quarter.html
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