Hot Stock PetGas rises 1% on positive 2Q results

by **Cals** Mon 11 Aug 2014, 22:52

Hot Stock PetGas rises 1% on positive 2Q results

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Monday, 11 August 2014 10:22

KUALA LUMPUR (Aug 11): Petronas Gas Bhd (PetGas) rose as much as 1% after the gas infrastructure and utilities firm reported positive financial results in the second quarter ended June 30, 2014.
Last week, PetGas announced its 2Q net profit rose 4% quarter-on-quarter to RM435.3 million while revenue grew 5% sequentially.
At 10.13 am today, PetGas gained 26 sen or 1% to RM21.34. The top gainer saw trades of 65,800 shares.
In a note, Kenanga Research analyst Teh Kian Yeong said PetGas’ 1H net profit of RM853.3 million came in within expectations at 48% and 50% of his FY14 full-year estimates and market consensus respectively.
Teh upgraded PetGas to ‘market perform’ from ‘underperform’ at RM21.08, but he maintained target price (TP) of RM21.54.
According to Teh, the topline improvement in PetGas was mainly attributable to the new Gas Processing Agreement (GPA) and Gas Transportation Agreement (GTA) effective April this year.
“The new GPA and GTA drove the revenues of gas processing and gas transportation units higher,” he said.
“However, bottom-line was partly off-set by higher operational expenditure,” he added.
Teh said he made no changes to his FY14, FY15 and FY16 forecasts.
Meanwhile, Affin Investment Bank Research also made no changes to its earnings forecasts. The research house maintained a ‘reduce’ call for PetGas with an unchanged TP of RM20.20.
“At its current valuation of 22 times CY15 price earnings ratio, we believe the near term earnings prospects are priced in,” said analyst Isaac Chow of Affin IB.
For investors with exposure to the utilities sector, Chow said Tenaga Nasional Bhd would be closely watched given its robust earnings growth, heightened earnings visibility and attractive valuation.