MIDF reiterates ‘buy’ on PetDag

KUALA LUMPUR: MIDF Research has kept its positive outlook on Petronas Dagangan Bhd despite the weaker-than-expected earnings recorded year-to-date.

The research house has maintained its “buy” rating on the stock but lowered its target price to RM27.75 from RM28.35 previously.

It said its positive view was owing to Petronas Dagangan’s effort in mitigating the impact of lower sellng prices by increasing pump productivity, aggressive marketing and promotion as well as creating brand stuckiness via the SETEL mobile application.

For the recently announced third quarter, earnings of RM239mil brought cumulative nine-month financial year 2019 earnings to RM702.9mil, which came to 67.3% and 68.9% of MIDF’s and consensus full-year estimates, respectively.

Revenue was flat for the recently announced quarter on a year-on-year (y-o-y) basis, while earnings fell 11.6% y-o-y due to the decline in average selling prices by 4% y-o-y, despite an increase in sales volume.

The retail segment showed marginal revenue growth of 1.9% y-o-y due to higher sales volume, improved station productivity, a higher number of stations in oeprations and the introduction of the Petronas Primax 95 with Pro-Drive earlier this year.

However, pre-tax profit dropped 27.6% y-o-y due to higher product cost and less favourable MOPS price trend, as well as depreciation and amortisation.

In the commercial segment, revenue and profit fell 2.2% and 1.75 y-o-y respectively due to a decline in average selling prices by 10% y-o-y and higher operating expenditure.

Source: TheStar