Shares of Petronas Dagangan, the Malaysian downstream petroleum product retailer, saw a boost on Tuesday as investors expressed optimism about its future prospects. The company reported better second-quarter earnings, attributed to resilient domestic demand and the anticipation of increased international travel.
Currently, Petronas Dagangan’s shares are trading at 22.28 ringgit, reflecting a 3.1% increase.
In its recent announcement, Petronas Dagangan disclosed a 16% rise in net profit, amounting to MYR275.7 million ($59.2 million), compared to the previous year. This growth was primarily driven by higher contributions from its commercial segment. However, the company experienced a 6.2% decline in quarterly revenue, totaling MYR8.91 billion, due to lower oil prices.
Affin Hwang Investment Bank has revised its rating on the stock from hold to buy, along with an increased target price of MYR24.90, up from MYR23.50. The bank has also raised its earnings-per-share forecasts for the years 2023, 2024, and 2025 by 32%, 33%, and 20%, respectively. These adjustments are based on various catalysts identified by Affin Hwang.
According to Steven Chan, an analyst at Affin Hwang, Petronas Dagangan is expected to benefit from the resumption of air and road travel. Chan notes that the stock is currently trading at the lower end of its valuation range and highlights its attractive dividend yield of approximately 5%-6%.
TA Securities predicts steady growth in sales volume and earnings for Petronas Dagangan in the coming quarters. This growth is anticipated due to a robust domestic economy and the absence of a one-off prosperity tax. Analyst Ong Tze Hern highlights that the commercial division’s sales volume is expected to increase as air-passenger traffic rises. However, higher operating expenditure may temper net profit growth.
TA Securities maintains a buy rating and a target price of MYR26.70 for Petronas Dagangan.
