Petronas Gas Bhd (Dec 27, RM14.40)
Maintain buy at RM14.14 with revised fair value of RM15.91 (from RM15.52): Last Friday, Petronas Gas Bhd (PetGas) announced it has established a code of conduct for third-party access (TPA) to the gas transport system it operates in Peninsular Malaysia. The “PetGas network code” stipulates that any party wishing to use PetGas’ gas transport system will have to enter into a gas transport agreement (GTA) with PetGas. The transport tariff set for TPA to PetGas’ pipelines is lower for Central Zone 3 but higher for Southern Zone 2, as the gas injection point via the Malacca LNG regas plant is in Zone 3.
Gas injected from the Kerteh gas processing plant enjoys an effective transport tariff of RM1.31 per gigajoule (GJ = 1,000 cu ft). Gas injected via the TPA at the Malacca LNG regas plants has a lower effective transport tariff of RM1.24 per GJ, or 5.3% lower than for Kerteh gas. This is within our expectations as for the LNG generated gas, the supply injection point is closer to the centre of demand, thus utilising less pipeline capacity. We believe the network code only covers access to the existing pipelines.
The TPA tariffs is another step to full disclosure of the additional revenue to be generated by the Malacca LNG plant. We believe this should reduce PetGas’ risk premium and thus lower our weighted average cost of capital from 9.6% to 9.4%. This pushes up our discounted cash flow-based fair value to RM15.91 from RM15.52. PetGas remains our top utility buy and one of our Top 10 “buys” for 2012. — OSK Research, Dec 27
This article appeared in The Edge Financial Daily, December 28, 2011.
Maintain buy at RM14.14 with revised fair value of RM15.91 (from RM15.52): Last Friday, Petronas Gas Bhd (PetGas) announced it has established a code of conduct for third-party access (TPA) to the gas transport system it operates in Peninsular Malaysia. The “PetGas network code” stipulates that any party wishing to use PetGas’ gas transport system will have to enter into a gas transport agreement (GTA) with PetGas. The transport tariff set for TPA to PetGas’ pipelines is lower for Central Zone 3 but higher for Southern Zone 2, as the gas injection point via the Malacca LNG regas plant is in Zone 3.
Gas injected from the Kerteh gas processing plant enjoys an effective transport tariff of RM1.31 per gigajoule (GJ = 1,000 cu ft). Gas injected via the TPA at the Malacca LNG regas plants has a lower effective transport tariff of RM1.24 per GJ, or 5.3% lower than for Kerteh gas. This is within our expectations as for the LNG generated gas, the supply injection point is closer to the centre of demand, thus utilising less pipeline capacity. We believe the network code only covers access to the existing pipelines.
The TPA tariffs is another step to full disclosure of the additional revenue to be generated by the Malacca LNG plant. We believe this should reduce PetGas’ risk premium and thus lower our weighted average cost of capital from 9.6% to 9.4%. This pushes up our discounted cash flow-based fair value to RM15.91 from RM15.52. PetGas remains our top utility buy and one of our Top 10 “buys” for 2012. — OSK Research, Dec 27
This article appeared in The Edge Financial Daily, December 28, 2011.
