PETGAS KEPT AT 'HOLD', 'MARKET PERFORM' AFTER BRIEFING ON NEW TARIFFS

KUALA LUMPUR, Jan 30 (Bernama) -- Analysts have kept Petronas Gas Bhd (PetGas) at “hold” and “market perform” after a briefing by the company on the latest gas tariffs.

Its “regulated capital expenditure (capex) is guided to be above RM2 billion” based on the incentive-based regulation (IBR) Regulatory Period 2 (RP2) 2023 to 2025 tariffs, said CGS-CIMB Research. 

The research house said the bulk of the capex will be allocated to peninsular gas utilisation (PGU), which is significantly higher than RP1, based on a briefing by PetGas recently.

However, it said PetGas did not disclose its RP2 regulated return but has guided that it is similar to other utility players under regulation.

"We gather that overall revenue reduction from PGU under RP2 will likely come to only 2 per cent instead of 5.8 per cent versus RP1," the research house said in a note. It is maintaining its “hold” call for PetGas with a target price of RM16.90.

Kenanga Research said PetGas' earnings are expected to remain stable with more than 90 per cent being safeguarded by the IBR framework.

It said the company's future earnings will remain neutral given a high asset base is set to mitigate a lower weighted average cost of capital (WACC).

"We hold the view that terms stipulated under the RP2 will have a neutral impact on PetGas as a lower WACC is cushioned by a growing regulated asset base, while the yearly adjustments on forex fluctuation and gas prices will reduce earnings volatility," it said. 

Kenangan has maintained a market perform call on PetGas and tweaked its target price from RM17.00 to RM17.13.

At 11.30 am, PetGas rose 22 sen to RM17.22 with 87,900 shares changing hands. 

-- BERNAMA