Stock Name: PETGAS
Company Name: PETRONAS GAS BHD
Research House: HWANGDBS
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining its Fully Valued call on PETRONAS GAS BHD [] and it reduced its target price to RM8. PetGas announced poor terms for its fourth Gas Processing and Transmission Agreement (GPTA) for the period April 1, 2010 to March 31, 2014, with its reservation charge (60% of FY09 revenue) reduced by 40% to RM103.5 million a month. The flow rate charge structure is now dependent on zones that are the location of PetGas' customers. "We understand the intention of this structure is to fairly compensate PetGas for the distance it transmits the gas. "Although the breakdown of gas transmission is unavailable at this juncture, an initial estimate suggests a worse deal as only the Central zone, among four zones, commands higher flow rate charges (RM1.793/GJ) compared to RM1.57/GJ previously," HDBSVR said. Petronas will provide natural gas to PetGas for its internal consumption (IGC) at no cost provided PetGas operates within the agreed operating parameters. "We understand that IGC made up 15-20% of PetGas' throughput cost and estimated savings from the new term, despite widening margins, is insufficient to compensate for the lower fees. We expect PetGas throughput gross margins to improve to c.52% in FY11F," it said. HDBSVR lowered FY11-12F profit by 7-8% after taking into account its initial estimates of the new GPTA terms, but also upgraded PetGas' CUF earnings on improved outlook for the oil & gas sector.
Company Name: PETRONAS GAS BHD
Research House: HWANGDBS
KUALA LUMPUR: Hwang DBS Vickers Research (HDBSVR) is maintaining its Fully Valued call on PETRONAS GAS BHD [] and it reduced its target price to RM8. PetGas announced poor terms for its fourth Gas Processing and Transmission Agreement (GPTA) for the period April 1, 2010 to March 31, 2014, with its reservation charge (60% of FY09 revenue) reduced by 40% to RM103.5 million a month. The flow rate charge structure is now dependent on zones that are the location of PetGas' customers. "We understand the intention of this structure is to fairly compensate PetGas for the distance it transmits the gas. "Although the breakdown of gas transmission is unavailable at this juncture, an initial estimate suggests a worse deal as only the Central zone, among four zones, commands higher flow rate charges (RM1.793/GJ) compared to RM1.57/GJ previously," HDBSVR said. Petronas will provide natural gas to PetGas for its internal consumption (IGC) at no cost provided PetGas operates within the agreed operating parameters. "We understand that IGC made up 15-20% of PetGas' throughput cost and estimated savings from the new term, despite widening margins, is insufficient to compensate for the lower fees. We expect PetGas throughput gross margins to improve to c.52% in FY11F," it said. HDBSVR lowered FY11-12F profit by 7-8% after taking into account its initial estimates of the new GPTA terms, but also upgraded PetGas' CUF earnings on improved outlook for the oil & gas sector.
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