Another beat
Hampered by poor predictability
4Q21 results were again ahead of our/street expectations on post-MCO volume recovery and further revenue-cap adjustments. We believe the lack of accompanying share price appreciation is in part due to the opaque (and not improving) regulatory disclosures. Maintain HOLD with a higher DCF-based MYR2.90 TP (+4%). GMB is our relative preference among the gas utilities.
Results above expectation
GMB’s 4Q21 net profit of MYR69m (stable YoY, +11% QoQ) brings FY21 net profit to MYR250m (+17% YoY), 5%/13% above our/consensus full-year forecasts respectively. 4Q21 earnings were boosted by QoQ volume recovery and further revenue-cap adjustments (clawback for revenue shortfall). A 6sen interim DPS was declared, with a final DPS likely to come upon the release of audited accounts (consistent with past practice). We expect GMB to maintain a 90% payout ratio for FY21.
Commendable spreads
4Q21 gas volume of 53.8 tn BTU was up 14% QoQ (-2% YoY) following the easing of movement restrictions. FY21 volume was ultimately up 1.5% YoY, below reference. We estimate GMB accrued c.MYR45-50m of revenue cap adjustment for FY21. Excluding the accrual, we estimate GMB’s FY21 spread at a very commendable c.MYR2.45/mmBTU, possibly from improved retail margins. FY21 capex of MYR178m was again below budget, with management expecting to catch up in FY22.
Maintain HOLD
We raise our FY22/23E net profit by 6%/7% to reflect latest run rates and introduce FY24 forecasts. Our TP (DCF-based assuming 8.1% WACC and 2% long-term growth) is raised to MYR2.90 (+4%). Gas tariffs are now completely liberalised beginning 2022, and management expects to, at least, maintain margins. Every 5sen/mmBTU change to our spread assumption (MYR2.45/mmBTU) would move our FY22E net profit by 3.4%.