PetGas holds steady outlook despite higher costs

PETALING JAYA: Petronas Gas Bhd’s (PetGas) performance is still impacted from the Putra Heights incident, in addition to the review of the sales and services Tax, Regulatory Period 4 electricity tariff, trade policies, and geopolitical risks that remain as near-term downside risks to growth.

MBSB Research said PetGas’ earnings for the first half of financial year 2025 (1H25) came in within its expectations at 47%, and consensus at 49%.

The group’s revenue for the second quarter of financial year 2025 (2Q25) and 1H25 slipped to RM1.6bil, down 4% year-on-year (y-o-y); and RM3.2bil (a 3% y-o-y decline) respectively.

This was due to lower product prices in the utilities segment, as well as the downward tariff adjustment and cost incurred for gas supply restoration works for gas transportation.

Nonetheless, this was cushioned by lower fuel gas cost in utilities, in tandem with the lower fuel gas price.

Meanwhile, 2Q25 core profit after tax and minority interests (Patami) was down by 3% y-o-y to RM453.5mil but 1H25 core Patami improved 1% y-o-y to RM925.4mil, attributed to higher share of profit from joint ventures.

“Gas transportation was impacted by the Putra Heights incident. Its 2Q25 and 1H25 revenue dropped to RM284.3mil (down by 4% y-o-y) and RM565.4mil (down by 5% y-o-y) respectively. This was following a downward tariff adjustment due to the sharing factor for the financial year 2024’s (FY24) lower internal gas consumption.

Meanwhile, 2Q25 and 1H25 earnings slipped to RM119.3mil (down by 23% y-o-y) and RM261.8mil (down by 18% y-o-y) respectively, mainly due to cost incurred for the gas supply restoration works following the Putra Heights incident,” MBSB Research said in a report yesterday.

The research house said one of the key takeaways from a briefing with PetGas is that permanent replacement works are ongoing.

PetGas’ pipeline network reliability has been impacted by the Putra Heights fire incident on April 1, 2025.

MBSB Research noted successful and safe gas-in was achieved on July 1, 2025 and pipeline services were restored to the northern sector, while permanent replacement works are progressing as planned.

“The temporary pipeline repair cost – roughly RM20mil – had been consolidated into 2Q25’s financials. We also noted that the temporary pipeline will not last beyond two years, hence, PetGas is expected to complete the permanent replacement within the timeline.”

Out of the RM60mil estimated impairment, about 53% had been reversed in 2Q25. The remaining impairment will gradually be reversed up until FY26.

MBSB Research maintained a “neutral” call on PetGas, despite upgrading its target price to RM19.25 (previously RM18.67), as the positives have been priced in.

CIMB Research also maintained a “hold” call on PetGas, albeit with a 2% higher target price of RM19.40.