Utilities squeeze
PTG’s 1Q22 core net profit was below our/consensus forecasts due
mainly to margin squeeze on electricity sales at the utilities division.
Current risk-reward remains largely balanced in our view. Maintain HOLD
with an unchanged MYR17.20 TP. We currently prefer Gas Malaysia (GMB
MK, BUY, CP: MYR3.15, TP: MYR3.30) among the gas utilities.
A slight miss
Excluding unrealised forex, PTG’s 1Q22 core net profit of MYR416m (-23%
YoY, -8% QoQ) was 22%/21% of our/consensus full-year forecasts
respectively. The miss was mainly attributable to the utilities division
which seemingly suffered from a margin squeeze on electricity sales due
to the non-pass through of higher gas costs. A 16sen interim DPS was
declared, unchanged YoY.
Mixed segmentals
Segmental trends were mixed. On a QoQ basis, processing EBIT was
stable, transport EBIT was higher, while regas and utilities EBIT were
lower. Regas experienced higher maintenance activities during the
quarter. Utilities meanwhile suffered from a margin squeeze on
electricity sales, with the results commentary alluding to the non-pass
through of higher gas costs. This is despite the imposition of 3.7sen/kWh
surcharge in Peninsular Malaysia for 1H22.
Maintaining forecasts
Management will host a results call this morning, and should offer
additional colour on the outlook of the utilities division. Our earnings
forecasts and MYR17.20 TP (DCF-based assuming 7.2% WACC and 2% longterm growth) are unchanged for now. We believe the earnings step-down
from both Cukai Makmur (FY22) and potentially lower transport tariff
(FY23) are largely priced-in.