Gas Malaysia is world class: Maybank IB (5209)

KUALA LUMPUR: Gas Malaysia Bhd is "world class" in efficiency and reliability, on par if not better than its regional comparables, despite operating in a near monopolistic yet limiting environment, says Maybank IB Research.

Gas Malaysia, which is the sole licensed operator and distributor of natural gas in Peninsular Malaysia to customers who consume five mmscfd (Million Standard Cubic Feet per Day) of natural gas and below, is operationally a price and volume taker.

The buying and selling prices of natural gas are currently determined by the government while the right to supply gas is governed by the Gas Supply Agreement with Petronas.

Maybank IB said the company operates in a highly regulated environment, financially cash rich and could capitalise heads-on from the demand push for natural gas in Malaysia as liquefied natural gas import kicks-off in the second half of the year.

"Nonetheless, we believe that most of the mid-term prospects have been priced in. Current price implies dividend yield of four per cent, which is at the lower end of our basket of net dividend yield play stocks of less than five per cent," it said in a research note.

The research house also said the company's strength was in its high cash flow generative capacity and dividends disbursement.
Gas Malaysia has zero debt, sits on a 'war chest' of RM327 million, has consistently generated significant free cash flow and targets a minimum 75 per cent dividend payout. -- BERNAMA