Petronas Gas Bhd (Dec 2, RM14)
Maintain buy at RM13.32 with fair value of RM15.52: During the press conference on Petronas Gas Bhd’s (PetGas) 2Q results, its president Datuk Shamsul Azhar Abbas announced that the company plans to build two more liquefied natural gas (LNG) terminals in Pengerang and Lahad Datu and is considering a fourth in Lumut. The Pengerang and Lahad Datu terminals are expected to be completed by 2015. There will also be a floating LNG plant in Kanawit, Sarawak, by 2015 and possibly a second floating LNG plant in Sabah by 2016.
While we have often talked about the Pengerang and Sabah LNG terminals, this is the first time we have heard of the Lumut terminal. Given the presence of numerous gas fired power plants (Malakoff’s Segari Energy Ventures and GB3) and the existence of deep draft ports in the area, it would certainly be no surprise if a fourth LNG terminal emerges in Lumut.
While Shamsul had previously said that Pengerang should have a LNG terminal, which we understand will have a rated capacity of 3.8 million tones, similar to Malacca, it was Sabah state officials who talked about having a LNG terminal in Sabah. Now Petronas has officially said that a LNG terminal will be built in Lahad Datu to cater for the new Sabah east coast gas plant and possibly new industries in that area. We understand that this terminal will have a rated capacity of one million tonnes per year but this could go up pending an assessment of demand before construction begins. As for the Sabah and Sarawak floating LNG terminals, we are aware that these have been on the drawing board since 2007 but we believe MISC will want to be the operator of these terminals.
As we mentioned in our previous reports, we believe PetGas, as the operator of the upcoming first LNG terminal in Malacca, will also get to be the owner-operator of the LNG terminals in Pengerang, Lahad Datu and Lumut as well. We had already bumped up our terminal growth rate for PetGas to 3.5% and raised our fair value (FV) to RM15.52 (See our Nov 25 report) to account for potential earnings from Pengerang and Lahad Datu. We will await further details before raising our fair value further. As of now, no contract has been signed by PetGas confirming that the group will indeed own and operate the other LNG import terminals in Malaysia.
PetGas remains our top utility buy and one of our top 10 “buys” for the market overall. The group’s existing business is defensive in nature while the upcoming LNG terminals will enhance its appeal as well as safe growth angle given that the gas shortage in Peninsular Malaysia may become more acute in the coming years. — OSK Research, Dec 2
This article appeared in The Edge Financial Daily, December 5, 2011.
Maintain buy at RM13.32 with fair value of RM15.52: During the press conference on Petronas Gas Bhd’s (PetGas) 2Q results, its president Datuk Shamsul Azhar Abbas announced that the company plans to build two more liquefied natural gas (LNG) terminals in Pengerang and Lahad Datu and is considering a fourth in Lumut. The Pengerang and Lahad Datu terminals are expected to be completed by 2015. There will also be a floating LNG plant in Kanawit, Sarawak, by 2015 and possibly a second floating LNG plant in Sabah by 2016.
While we have often talked about the Pengerang and Sabah LNG terminals, this is the first time we have heard of the Lumut terminal. Given the presence of numerous gas fired power plants (Malakoff’s Segari Energy Ventures and GB3) and the existence of deep draft ports in the area, it would certainly be no surprise if a fourth LNG terminal emerges in Lumut.
While Shamsul had previously said that Pengerang should have a LNG terminal, which we understand will have a rated capacity of 3.8 million tones, similar to Malacca, it was Sabah state officials who talked about having a LNG terminal in Sabah. Now Petronas has officially said that a LNG terminal will be built in Lahad Datu to cater for the new Sabah east coast gas plant and possibly new industries in that area. We understand that this terminal will have a rated capacity of one million tonnes per year but this could go up pending an assessment of demand before construction begins. As for the Sabah and Sarawak floating LNG terminals, we are aware that these have been on the drawing board since 2007 but we believe MISC will want to be the operator of these terminals.
As we mentioned in our previous reports, we believe PetGas, as the operator of the upcoming first LNG terminal in Malacca, will also get to be the owner-operator of the LNG terminals in Pengerang, Lahad Datu and Lumut as well. We had already bumped up our terminal growth rate for PetGas to 3.5% and raised our fair value (FV) to RM15.52 (See our Nov 25 report) to account for potential earnings from Pengerang and Lahad Datu. We will await further details before raising our fair value further. As of now, no contract has been signed by PetGas confirming that the group will indeed own and operate the other LNG import terminals in Malaysia.
PetGas remains our top utility buy and one of our top 10 “buys” for the market overall. The group’s existing business is defensive in nature while the upcoming LNG terminals will enhance its appeal as well as safe growth angle given that the gas shortage in Peninsular Malaysia may become more acute in the coming years. — OSK Research, Dec 2
This article appeared in The Edge Financial Daily, December 5, 2011.
