CIMB Research raises Petronas Dagangan target price to RM34

KUALA LUMPUR: CIMB Equities Research raised the target price of Petronas Dagangan (PetDag) from RM32.80 to RM34.
It said on Friday that after revving up a record 1H, PetDag's performance decelerated in 3Q due to a drop in Mean of Platts Singapore (MOPS).
The nine-months net profit missed expectations at 63% of its full-year forecast and 65% of consensus. However, PetDag did not disappoint with its dividend per share of 17.5 sen, bringing it year-to-date to 52.5 sen.
“Although MOPS typically rises closer to year-end, we lower our FY13 EPS to account for the slowdown in 3Q. However, we raise our FY14-15 EPS on lower tax rate assumptions of 26%-27% from 29%-30% before.
“Our higher target price is still based on 22.3 times CY15 P/E, a 40% premium over our target market P/E of 15.9 times, but still within the historical P/E range of O&G big caps. Maintain Outperform with swift expansion as a catalyst,” it said.
CIMB Research said the decline in Mean of Platts Singapore (MOPS) in September pushed down the selling prices of selected products, although costs were higher.
However, the blow was softened by the surge in sales volume for jet fuel, fuel oil and LPG.
While 3Q net profit eased 5% on-yea, but CIMB Research expects a commendable finish in 4Q as MOPS typically rises in December. Also, 4Q usually benefits from a spike in long-haul travels during the year-end school holidays.
“Despite the MOPS volatility, PetDag's retail expansion plans are intact. As at September, the company operated 1,045 petrol stations. It is the one to beat in the commercial and LPG segments, but has some catching up to do in the retail and lubricant segments. It is targeting to become an all-round leader in three years’ time,” said the research house.