Maybank IB is of the view that the Petronas Gas RP2 tariff outcome appears better relative to expectation, with a higher-than-expected transport tariff offsetting the lower Pengerang regas tariff. Regulatory details remained undisclosed at the time of writing.
The research house maintains a HOLD with a higher MYR17.40 TP (+2%) following the initial round of earnings revisions. The investment house prefers Gas Malaysia (GMB MK, BUY, CP: MYR3.25, TP: MYR3.80) among the gas utilities.
Transport tariff decline not as steep
The transport tariff for RP2 (2023-2025) has been set at MYR1.069/GJ/day, a 5.8% decrease from MYR1.129/GJ/day in RP1. This is better than the expectation of a c.20% decline (recall there is a scheduled RAB step-down in place). Regulatory details have not been disclosed, thus it is unclear whether the higher-than-expected tariff is due to WACC/capex (earnings accretive) or opex (earnings-neutral). Separately, RP2 regas tariff for the Melaka and Pengerang plants have been set at MYR3.455/GJ/day (unchanged) and MYR3.165/GJ/day (-9.2%) respectively.
Awaiting further details
Note that under the regulator’s tariff determination model, revenue (and thus tariff) is a function of 1) regulated WACC, 2) capex (the RAB earns a return) and 3) opex (merely a pass-through and is thus earnings-neutral). During the previous tariff review (RP1), the inclusion of internal gas consumption (opex) was a major driver of tariff movement. The house expects
PTG to likely provides more details in due course.
Raising earnings
Maybank IB raises FY23/24 earnings forecasts by 3% each (FY22 is unchanged) to reflect the latest transport and regas tariffs. TP (DCF-based assuming 7.2% WACC and 2% long-term growth) is consequently raised to MYR17.40 (from MYR17.00). With the RP2 transport tariff overhang now out of the way, PTG’s earnings profile has reverted to being stable.
