PetDag top loser at mid-morning as 3Q net profit falls 29.1%

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KUALA LUMPUR: Petronas Dagangan Bhd (PetDag) shed as much as 2.7% in early morning trades after releasing its third quarter ended Sept 30, 2014 (3Q14) results yesterday which saw its net profit plunge 29.1% to RM160.4 million – from RM226.2 million in 3Q13 – on lower sales volume and higher product cost, thus lower gross margins.

At 10 55 am, PetDag was the top loser on the bourse, losing 54 sen to settle at RM19.96, with 199,200 shares changing hands. The counter closed at RM20.50 yesterday and opened at RM20.10 this morning.

Analysts said PetDag’s nine months results came in below expectations.

Kenanga Investment Bank Bhd in a research note today maintains a ‘market perform’ call on PetDag with a target price of RM19.64.

On outlook, the research house noted that PetDag has been facing deteriorating profit margins for the past 2-3 years on higher operating costs, where little room remains to crimp on these costs.

“However, business volumes are set to drive its earnings higher, especially from the retail segment second half of 2014 onwards,” said analyst Teh Kian Yeong.

Meanwhile, CIMB Investment Bank Bhd (in a note dated Nov 4) maintains its ‘hold’ call on PetDag but with a reduced target price of RM20.80. The research house says it prefers SapuraKencana Petroleum Bhd and TH Heavy Engineering Bhd.

Analyst Norziana Mohd Inon however said the interim dividend per share of 12 sen “did not disappoint”, being a robust 74% payout.

Norziana Mohd Inon said despite the oil price downtrend, pointed that management is committed to defending its market share, which stands at an estimated 31% for retail, 68% for commercial, 57% for cooking gas and 24% for lubricants.

She also noted that PetDag’s retail expansion continues, with management targeting a total of 30 new stations this year. It started FY14 with 1,069 petrol stations and opened 16 stations in the first half of the year.

“By year-end, the bulk of the company's RM500 million annual capex (excluding RM200 million set aside for operations in the Philippines, Vietnam and Thailand) will be spent on widening its domestic retail network,” Norziana remarked.