LNG Will Drive Petronas Revenue Growth (Malaysia)

Petronas Gas Bhd’s (PTG) liquefied natural gas (LNG) plants will not only drive its gas transportation, processing and fixed reservation revenue up, but the capital expenditure (capex) incurred should also drive down PTG’s tax rate to below 20 per cent.

Following news of PTG’s share price increasing to 11.4 per cent over some eight trading days, OSK Research Sdn Bhd (OSK Research) believed that the rally in LTG’s share price was partly due to the market coming to recognise PTG’s growth potential over the longer term.

This was in accordance with its Melaka Liquefied Natural Gas (LNG) regasification terminal that would come on stream in mid-2012.

“We have yet to build in any contribution from the potential Pengerang and Sabah LNG terminals. Nonetheless, we estimate that the Melaka LNG plant alone would be able to contribute at least RM287 million in additional revenue from gas transportation and propane as well as butane extraction,” OSK Research pointed out.

This according to analyst is equivalent to 7.9 per cent of additional revenue, without factoring in the likely fixed reservation revenue from operating the LNG plant.

On a further note, there would be significant capex from PTG in the next few years as it invested RM1 billion to refurbish its Gas Processing Plants 2 and 3.

Apart from that, its total investment of RM1.4 billion in the Melaka LNG plant and RM540 million in its Kimanis power plant would also see an increase in the group’s capex.

“We have yet to include any capex for the potential Pengerang and Sabah LNG plants. All this spending would mean higher investment tax allowances, which will drive down PTG’s tax rate,” said the research house.

Under Terms 2 and 3 of the Gas Processing Transmission Agreement, tax rates reached a low of 2.7 per cent in financial year 2007 (FY07) before climbing back to 24 per cent in the last three financial years based on a lack of capex.

Hence, OSK Research anticipated a possible dip of 18 per cent in tax rate for FY14 and FY15 owing to the capex cycle.

Going forward, the research firm raised its forecasts by between 3.7 per cent and 6.4 per cent and analyst believed that PTG should record stronger profit growth after the current nine-month financial year, which would run into gas supply snags offshore Peninsular Malaysia.

(theborneopost)

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Source: theborneopost, June 22, 2011;