1H14 net profit was in line at 50% of our full-year forecast, and 47% of consensus.
A lower interim DPS of 5sen was declared (6 sen in 1H13), placing into doubt a 100% payout in 2014.
Maintain HOLD, TP unchanged at MYR3.80.
Volume of gas sold in 2Q14 grew 2% YoY. On a sequential basis however, volume was likely up more as the tariff hike in May 2014 had budgeted for GMB to sell in excess of its 382mscfd regulatedgas quota without an erosion of spreads.
We have previously highlighted the regulatory risks for GMB, as volume growth in 2015 requires: i) more tariff hikes or, ii) further deferment of the reduction in regulated-gas quota (from 382 to 300mmscfd) for GMB to preserve spreads. These events require approval from the Energy Commission and/or PETRONAS.
Our forecasts and MYR3.80 TP are unchanged pending further updates from management. We value GMB on a DCF, assuming 7.3% WACC and 2% long-term growth. Our target price implies a PER of 26.9x and net yield of 3.7% in 2014. GMB presently trades at a discount to PTG MK, deservedly so given the higher earnings risk.
Source: Maybank Research - 21 Aug 2014
A lower interim DPS of 5sen was declared (6 sen in 1H13), placing into doubt a 100% payout in 2014.
Maintain HOLD, TP unchanged at MYR3.80.
What’s New
GMB’s 2Q14 net profit of MYR49m (+9% YoY, +18% QoQ) brings 1H14 net profit to MYR91m (+6% YoY), representing 50% of our full-year forecast and 47% of consensus. A lower interim DPS of 5sen (71% payout) was declared (6 sen in 1H13; 91% payout).Volume of gas sold in 2Q14 grew 2% YoY. On a sequential basis however, volume was likely up more as the tariff hike in May 2014 had budgeted for GMB to sell in excess of its 382mscfd regulatedgas quota without an erosion of spreads.
What’s Our View
The lower interim DPS potentially raises doubt on a 100% payout in 2014. While GMB’s stated policy consists merely of a minimum 75% payout, we believe investors are accustomed to a 100% payout, having seen the company do so in 2012 and 2013.We have previously highlighted the regulatory risks for GMB, as volume growth in 2015 requires: i) more tariff hikes or, ii) further deferment of the reduction in regulated-gas quota (from 382 to 300mmscfd) for GMB to preserve spreads. These events require approval from the Energy Commission and/or PETRONAS.
Our forecasts and MYR3.80 TP are unchanged pending further updates from management. We value GMB on a DCF, assuming 7.3% WACC and 2% long-term growth. Our target price implies a PER of 26.9x and net yield of 3.7% in 2014. GMB presently trades at a discount to PTG MK, deservedly so given the higher earnings risk.
Source: Maybank Research - 21 Aug 2014
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