GAS MALAYSIA

From HLB research

Gas Malaysia


Stable Cash with Net Cash Position

§ Gas Malaysia (GMB) is one of the only two natural gas (NG) supplier in Peninsular Malaysia (the other is Petronas Gas).

§ GMB will cover new market with initial demand of < 5mmscfd (previously 2mmscfd), giving more upside to GMB market share. GMB is effectively monopolizing this market segment with no direct competitor.

§ GMB Margin is under government's discretion.

§ The demand for NG is likely to stay robust given its relative advantages and government' initiatives to meet low emission target by 2020.

§ GMB had signed agreement with PGB to increase NG supply to 492mmscfd by 2015 (currently 382mmscfd) on a step up basis, in order to meet the increasing demand.

§ Stable earnings and cash flow, ensuring stable dividend payout. GMB will payout at least 75% of earnings, which translate into 4-5% net dividend yield.

§ We believe the fair value for GMB is RM2.55 based on 22x FY13 P/E and 3.4x FY13 P/B.


But I will not be subscribing for the IPO, will the uncertainty of the world market and the coming Malaysia
's election results, it is better wait and see.