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Petronas-listed firms among GLCs in best position to raise dividends

TheStar Tue, Mar 31, 2020 11:41am - 2 months ago


Petronas-listed firms are among the GLCs best positioned to significantly raise dividends while the others include MISC, Tenaga Nasional and RHB Bank.

KUALA LUMPUR: Petronas-listed firms are among the government-linked companies (GLCs) best positioned to significantly raise dividends while the others include MISC, Tenaga Nasional and RHB Bank.

UOB Kay Hian Malaysia Research had on Tuesday issued the report in the light of the government looking to control its budget deficit despite the enormous need to fiscal stimulate amid the Covid-19 impact.

It also noted that considering the depressed oil prices, this might limit Petronas’ ability to significantly assist as it explored listed GLCs’ ability to indirectly contribute to the government’s coffers by capital management.

“Our screening methodology essentially looks at government-linked companies (GLCs) with relatively more resilient cash flow, manageable capex requirements and solid balance sheets.

“In this respect, notable GLCs with capacity to raise dividends in the current environment are Petronas Chemicals, Petronas Dagangan, MISC, Petronas Gas, Tenaga and RHB Bank.

“Among the Petronas group of companies, we assess Petronas Chemicals and Petronas Dagangan have the largest capital management potential as our analysis indicates that both companies would still have a fairly substantial net cash balances even when we stress their cash flows.

“We note that Tenaga recently announced a special dividend per share of 50 sen and has scope for further capital management, given its cash pile of RM12bil vs working capital requirement of only RM3bil.

“Among GLC banks, RHB Group has the most potential to raise dividends with its CET1 of 16.3% being significantly higher than Maybank’s 14.6% and CIMB’s 13.0%. If RHB were to raise its dividend payout ratio to 70% from the current 50%, this would raise current yields from 6.0% to 7.9%, ” it said.

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