Gas Malaysia all set for strong 4Q24 earnings

PETALING JAYA: Gas Malaysia Bhd is expected to deliver another solid quarterly earnings in its upcoming fourth quarter financial year 2024 (4Q24) results, with a core net profit of between RM100mil and RM120mil.

UOB Kay Hian (UOBKH) Research, in its earnings preview, said a RM120mil core net profit would represent a growth of 3% quarter-on-quarter and 15% year-on-year for the group.

It noted the key drivers to boost the group’s earnings include a 10% natural gas (NG) volume growth, positive operating leverage and healthy Gas Malaysia Energy and Services Sdn Bhd’s (GMES) retail margin.

To recap, Gas Malaysia’s first nine months of 2024 (9M24) earnings were characterised by stronger-than-expected NG volume, positive operating leverage given higher NG volume and higher regulated revenues.

Additionally, this helped to offset relatively flat NG prices year-to-date, said UOBKH Research.

Against a backdrop of strong operating cash flow, the research house expects higher dividend payout from Gas Malaysia with a minimum payout of 75%.

“Based on our estimates, the stock offers an attractive 6% dividend yield for this year,” it added.

Separately, UOBKH Research understands that Gas Malaysia is proposing to build a regasification plant north of Peninsular Malaysia.

A foreign partner, possibly from Japan, together with Gas Malaysia may build a US$1bil regasification plant, with the operational date in 2029.

Based on a RM200mil to RM300mil equity requirement for the regasification plant, the research house expected Gas Malaysia to pay out 75% to 90% of its cash flow over 2025 to 2027.

Meanwhile, UOBKH Research said: “It is a crucial year for GMES as customer contracts are up for renewal.

“Positively, we understand that Gas Malaysia has secured contract renewal for at least 90% of its current customer base.”

Gas Malaysia commands an 80% share of the NG retail market in Peninsular Malaysia.

“We understand that the NG volume secured by its existing customers is higher than current contractual terms.

“We also understand that some customers have reverted to Gas Malaysia having previously pivoted to a competitor for a three-year contract,” the research house noted.

According to UOBKH Research, the potential market share gain in the retail segment will be a key rerating catalyst for the group.

Gas Malaysia is expected to focus on operational excellence.

The group also made a commendable three-year earnings compounded annual growth rate of 7%.