This article first appeared in Capital, The Edge Malaysia Weekly on January 5, 2026 - January 11, 2026

Target price: RM20.58 BUY

TA SECURITIES (DEC 29): PETRONAS Gas Bhd (KL:PETGAS) announced the approval of revised tariffs for gas transport and regasification services under Regulatory Period 3 (RP3), which will run from Jan 1, 2026 until Dec 31, 2028. In summary, RP3 base tariffs were broadly higher compared to RP2 (2023-2025), entailing an increase of 12.5% for the Peninsular Gas Utilisation (PGU) pipeline and 2.5% for the Sungai Udang regasification terminal (RGTSU), partly offset by marginally lower C-Tariff (-0.4%) and RGT Pengerang (RGTP) tariff (-0.7%). Similarly, allowed tariffs for FY26 were broadly higher against FY25 allowed tariffs with an increase of 14.8% for PGU and 2.4% for RGTSU, marginally offset by a decline of 1.1% and 1.5% for C-Tariff and RGTP respectively.

However, the announcement fell short of detailing the key tariff components, in particular the allowed rate of return and projected regulated asset base (RAB), which generally determine PetGas’ regulated earnings for the period. While the broadly higher tariffs look positive on the surface, we await further details to determine the key drivers for the higher tariffs. In hindsight, however, we reckon RAB is likely to continue expanding under RP3 from sustained regulated capex (and potentially higher capex for PGU to maintain integrity of assets following the pipeline fire incident in April 2025), which should underpin PetGas’ regulated earnings growth under RP3. In FY23 and FY24, the regulated businesses contributed up to 52% of group gross profit.

Maintain “buy” at an unchanged SOP-derived target price of RM20.58. Our TP implies a forward PER of 19 times (FY26F), which is close to PetGas’ 10-year historical mean of 20 times. PetGas is positioned well as one of the key upstream proxies for the energy transition from coal to gas as well as data centre-driven demand for power, being the largest gas supply infrastructure owner and operator in the country. Dividend yield is decent at 4.4% to 5.2% throughout our forecast horizon, backed by stable long-term contracts and regulated businesses.

Kawan Renergy Bhd

Target price: 76 sen OUTPERFORM

PUBLICINVEST RESEARCH (DEC 30): Kawan Renergy Bhd (KL:KENERGY) reported a core Patami of RM6.6 million in 4QFY25, higher by 59.1% y-o-y due to stronger contribution from the renewable energy and cogeneration segment. On a q-o-q basis, however, core net profit declined 18.2%, likely reflecting more conservative profit recognition from ongoing projects. For FY25, cumulative core Patami came in at RM24.5 million, broadly meeting both our and consensus expectations at 104%, and translating into a solid 33.2% y-o-y growth.

The group’s order book remains stable at RM108.2 million, predominantly supported by renewable energy and cogeneration projects, providing earnings visibility into FY26F. We remain positive on Kenergy’s outlook, underpinned by structural policy tailwinds from the National Energy Transition Roadmap (NETR), rising industrial power demand and increasing adoption of alternative on-site power solutions.

Accordingly, we maintain our “outperform” rating with a target price of 76 sen, based on a 16.3 times PER applied to forecast CY26 EPS of 4.67 sen.

Target price: 34 sen BUY

BIMB SECURITIES (DEC 30): Velesto Energy Bhd (KL:VELESTO) has announced the disposal of its entire equity interest in Velesto Workover Sdn Bhd for RM16.5 million cash, effectively exiting the well workover operations and well plug and abandonment (P&A) services, with completion targeted by 1H26.

The divestment is consistent with Velesto’s broader portfolio rationalisation and capital optimisation strategy. Management is streamlining operations to concentrate resources on its core rig business, where the group has scale, stronger competitive positioning and clearer earnings visibility. Notably, workover activities contributed to less than 5% of group revenue in FY24, with earnings contribution to Velesto’s bottom line being inconsistent, oscillating between small profits and small losses over recent years.

We view the disposal price as fair, with an estimated marginal gain of around RM0.4 million. The divestment allows Velesto to sharpen its focus and redeploy resources towards its core rig business.

Maintain “buy” on Velesto with an unchanged target price of 34 sen. Velesto remains our top dividend play (more than 10% yield), with improving earnings quality and a clear management focus on maximising shareholder returns.

Target price: RM1.87 BUY

MAYBANK INVESTMENT BANK (DEC 23): With electricity restored to Cahya Mata Sarawak Bhd’s (KL:CMSB) phosphate plant (PP) in Bintulu in September, losses from the phosphate segment will moderate. All four furnaces are being fired up at the PP, with commercial operations expected to commence in April 2026. The plant is designed to produce 48,000 tonnes per annum (tpa) of yellow phosphorus and 60,000 tpa of food grade phosphoric acid but CMSB will initially produce only the former — a raw material for the latter.

We trim FY25E/FY26E core net profit (CNP) by 7%/8% as we defer the break-even date for the plant to 3Q26 from 4Q25 as per CMSB’s guidance, but raise FY27E CNP by 10% on higher pre-tax profit margins of 15% from 3% previously. Note that our revised CNP estimates also employ a tad weaker average selling yellow phosphorus price of US$4,000/tonne from US$4,100/tonne previously and an average USD/RM exchange rate of 4.20 from 4.45 previously.

Rolling forward our valuation base year to FY26 from FY25 and ascribing a higher PER of 13 times (pegged to long-term mean, given improving prospects) from 12 times, we raise our target price to RM1.87 from RM1.66.

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