Hot Stock Petronas Gas falls 1% amid analysis its price is high

Business & Markets 2013
Written by Cynthia Blemin of theedgemalaysia.com
Friday, 01 November 2013 12:35
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KUALA LUMPUR (Nov 1): Shares of Petronas Gas Bhd became the second top
loser in late morning trades, after analysts said its current price has fully
factored in its growth potential and the stock is expensive.
According to analysts, the share price has risen 18% in the past three months
to reach its all-time high of RM24.52 yesterday.
The stock fell despite Petronas Gas’ announcement yesterday that it recorded
a higher net profit of RM379.8 million in the third quarter ended September 30,
2013, compared to RM317.7 million a year ago.
At 11.55 am today, the shares of Petronas Gas fell 22 sen or 0.9% to RM24.30
on trades of 55,100 shares.
TA Research, in a note today, issued a “sell” call on Petronas Gas with a target
price (TP) of RM21.
Kenanga Research downgraded Petronas Gas from market perform call to
underperform, with an unchanged TP of RM20.77.
In its notes, TA said: “While there is ample long-term catalyst for the stock, we
believe the current share price has fully factored the growth potential based on
DCF target price of RM21.
“At the last price of RM24.52, it is trading at an expensive FY14PER of 29 times
vs. 10-year average PER of 21 times and FBM KLCI’s 15 times”.
The research house, analysing Petronas Gas’ results, said 9MFY13 core net
profit of RM1,742 million was better than its and consensus expectations,
making up 86.4% and 78.4% of forecasts respectively.
It also noted that it was strong y-o-y growth of 56.9%.
Looking further, TA Research said it has also raised its FY13 by 6.6% after adjusting higher its margin assumption, while FY14 profits
were raised by 5.1% after imputing higher sales from the regasification business.
Kenanga Research, in its notes today, said: “The share price has risen 18% in the past three months to reach its all-time-high of RM24.52
yesterday, which the valuation is stressed, in our view.”
“While we still like its earnings profile, we believe it is time to take profit,” it added.
On its outlook, Kenanga Research said Petronas Gas 2H13 is expected to be stronger as the Melaka RGT is operational.