KUALA LUMPUR: Gas Malaysia Bhd's long-term earnings prospects remain intact despite a potential setback in 2QFY20 due to the movement control order, says Kenanga research.
"While we remain positive on its long-term earnings prospects given the RM1.80-2.00/mmbtu margin spread that will keep its earnings growing on the back of volume growth, we are cautious on near-term impact from the economy slowdown caused by the lockdown," it said, while reiterating its market perform recommendation.
Kenanga has a target price of RM2.50 on the counter, which represents a 10.8% downside to the its last traded price of RM2.77 on Thursday.
The research house noted that the gas provider experienced a mild impact from the MCO in 1QFY20 over two weeks.
It expects the duration impact in 2QFY20 to be almost half quarter till now, as some of its key off-takers are glove makers that are operating almost full-stream.
For 1QFY20, Gas Malaysia's core net profit of RM47.9mil came within expectations as it met 25% of Kenanga's and consensus full-year estimates.
Net profit jumped 16% year-on-year to RM47.9mil despite 6% lower revenue of RM1.61bil, due to a 4% rise in sales volume.
"The decline in revenue was largely due to lower average tariff of RM33.71/mmbtu sold in 1QFY20 from RM35.64/mmbtu sold in 1QFY19," it said.
Kenanga remains long-term positive on Gas Malaysia
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