Gas Malaysia rises 2.2% on firm 1Q earnings, positive outlook

Gas Malaysia rises 2.2% on firm 1Q earnings, positive outlook
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KUALA LUMPUR (May 13): Shares in Gas Malaysia Bhd rose 2.18% in early trade on Friday (May 13) after the company reported a 64.15% increase in net profit for the quarter ended March 31, 2022 (1QFY22) to RM91.32 million from RM55.63 million a year ago, driven by higher gross profit, lower administrative expenses and higher contributions from the group’s joint-venture companies.

At 9.30am, Gas Malaysia had added six sen to RM2.81, valuing it at RM3.61 billion. The stock earlier rose to a high of RM2.82.

Quarterly revenue also jumped 54.78% to RM1.78 billion compared with RM1.15 billion for the same quarter last year.

This was in line with higher average natural gas selling prices in tandem with global market prices, mitigated by lower volume of natural gas sold during the quarter under review.

Meanwhile, Kenanga Research maintained its “outperform”rating of Gas Malaysia at RM2.75, with a higher target price (TP) of RM3.10 (from RM3) and said Gas Malaysia surprised with a strong set of 1QFY22 results, which saw profit jumping 28% quarter-on-quarter despite the market liberalisation which started from January 2022.

In a note on Friday, the research house said this was largely thanks to better margins for Gas Malaysia Energy and Services Sdn Bhd, arising from better deals in contract renegotiations, coupled with a better retail market as gas prices spiked.

Kenanga said it feels comfortable after seeing the good set of 1QFY22 results as the market liberalisation may not be bad for Gas Malaysia as it managed to improve its profitability.

“Post earnings revision, we raise our discounted cash flow-driven TP to RM3.10 from RM3 previously.

“As such, we continue to rate the stock as an 'outperform', which is also supported by its above-average dividend yield of more than 6%. A risk to our call is lower–than-expected margin spread in the future.

“Going forth, earnings should stay elevated given the high gas prices,” it said.

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Gas Malaysia’s 1Q net profit grows 64% on higher gross profit, lower administrative expenses, JV companies’ contribution