Stock Focus PetGas earnings seen declining this year after tax-aided robust 2013

by **Cals** Wed 12 Feb 2014, 03:07

Stock Focus PetGas earnings seen declining this year after tax-aided robust 2013

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Tuesday, 11 February 2014 16:31

KUALA LUMPUR (Feb 11): The earnings for Petronas Gas Bhd’s (PetGas) this year (FY14) is expected to contract due to the normalisation of corporate tax rate after last year’s investment allowance and deferred tax write-backs, according to AmResearch.

In a note today, AmResearch’s analyst Alex Goh said PetGas had in FY13 enjoyed RM626 million investment allowance from the Lekas regassification terminal’s (RGT) and deferred tax write-backs of 24% from the 1%-point reduction in corporate tax rate.

Concurring, June Ng of HwangDBS Vickers Research said: “A lower tax rate in fourth quarter last year due to tax credit also boosted its earnings. Excluding the tax allowance, FY13 core earnings of RM1.5 billion was within our estimate.”

At 3.15 pm today, PetGas gained 4 sen or 2% to RM23.14. The stock saw some 215,700 shares exchanged hands.

PetGas yesterday released its fourth quarter results, in which its FY13 earnings were above consensus estimates, analysts said.

Goh said: “We fine-tuned FY14F-FY15F earnings as the group’s FY13 pre-tax and net profit came in within expectations.”

“FY16 earnings will see a normalised growth of 3%, underpinned by the stable recurring revenues of its main gas processing and transportation businesses.”

Despite PetGas better 4Q and full-year FY13 results, AmResearch retained a ‘hold’ call with fair value of RM24.30, but HwangDBS Vickers Research maintained its ‘buy’ call with target price (TP) of RM28.60.

Meanwhile, Ng and Goh said renewal of the gas processing and transmission agreement (GPTA) with Petronas was expected to have minimal impact.

The new agreements will replace the existing GPTA, effective April 1 this year. The current and fourth GPTA expires on March 14.

“Given Petronas’ 61% stake in PetGas, we expect minimal changes,” said Ng.

She pointed out that stable GPTA earnings over the last few reviews were also a factor, noting earnings from GPTA accounted for 85% of FY13 earnings before interest and tax.

Goh said: “The new pricing mechanism will be similar to the current model.”

Pending Petronas’ final investment decision by the first quarter this year, Ng said PetGas was well poised to secure the Pengerang onshore RGT in the second half of this year.

Goh said its capacity might not be significantly larger than the Lekas terminal.