By BERNAMA
HwangDBS Vickers Research has maintained a “buy” call on Petronas Gas with a target price of RM23.50, with increase in net earnings by 2-5% when the liquefied natural gas plant in Melaka is commissioned by month-end.
Doubts about the refinery and petrochemical integrated development (RAPID) project in Pengerang proposed by Petronas have been cleared with Barisan Nasional retaining control in Johor after the recent general elections, HwangDBS said in a research note today.
The proposed project is awaiting a final investment decision by first quarter 2014 and Petronas Gas (Petgas) is the front-runner for the regas plant given its involvement in the Melaka plant and the Pengerang plant is to be connected to the main Peninsular Gas Utilisation pipeline network.
Development of new regas plants and continued gas-related capital expenditure will be the key rerating catalysts for Petronas Gas, HwangDBS said.
The US$20 billion RAPID project in Pengerang with a capacity of 300,000 barrels per standard day will supply feedstock to RAPID’s petrochemical complex as well as produce gasoline and diesel that meet European specifications, it added.
An immediate earning accretion is expected, with every RM1 billion in investment expected to raise Petgas’ valuation by 19 sen per share, assuming 11% internal rate of return.
Apart from Pengerang, Petronas has also announced the group and its partners plan to invest RM15 billion in the North Malay basin to find new gas to meet rising demand in Peninsular Malaysia.
The project comprises nine discovered gas fields located about 300km off Peninsular Malaysia’s coast.
“We like Petgas for its resilient earnings with no fuel risk, strong parental support, solid balance sheet and promising growth prospects arising from Petronas’ larger capital expenditure,” said the research house.
–BERNAMA
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