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Investment Highlights
GAS
Malaysia Bhd (GM) has published its draft prospectus on the
Securities Commission's website and it is expected that GM will be
listed on Bursa in December 2011.
The biggest shareholders,
MMC Corp Bhd and Shapadu (Holdings) Sdn Bhd, currently own 55% of GM
while Tokyo Gas-Mitsui & Co (Holdings) Sdn Bhd and Petronas Gas
(PGas) hold the remaining 25% and 20% respectively. We estimate that
post-listing, PGas' equity interest in GM will be reduced to about
14.8%.
RM230m Gain for PGas
MMC's
managing director Datuk Hasni Harun indicated that GM could have a
market capitalisation of about RM5b or equivalent to about 16x PER
based on our estimate (at RM5b, the IPO price would be RM3.90).
Accordingly, PGas' 20% equity stake in GM is valued at about
RM1b, which is close to 10 times higher than its initial investment
cost of only RM103m. We reckon PGas' equity value will then be
lifted by about +10% to RM4.92/share (2QCY11: RM4.47).
Besides, as a result of 26% offer for sales exercise, PGas is
expected to recognise an estimated RM230m disposal gains in its
income statement, boosting CY11 bottom line by +14.6%. (Our estimate
is subject to the IPO price).
Minimal Future Impact
GM's contribution to PGas' total net profit was averaged at 5% or
RM54m for the past three years. Given PGas' ownership in GM will
dilute to below 20% post-listing (14.8%), contribution from GM
starting CY12 onwards will then be recognised as investment income
instead of associate contribution.
It was reported that GM is
committed to pay a guaranteed dividend of 100% and 75% payout in the
first two years after listing. We estimated that PGas' CY12 net
profit will only be affected marginally by about -1%.
Special Dividend?
We see the likelihood of PGas
rewarding shareholders on account of GM listing. Assuming PGas will
distribute fully the aforesaid disposal gains of about 12 sen per
share as special dividend, we expect PGas' estimated CY11 dividend
yield to be raised by approximately 1%-pts to 4.7%.
We still
recommend a 'Buy' for PGas with an unchanged TP of RM14.40, derived
from 16.5x PER plus net cash of RM1.27 per share. We continue to
like PGas as we expect the company to outperform the market.
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