PETDAG: Broadly In-Line Results Reported Amidst Revenue Headwinds, Sell Rating Maintained

TA SECURITIES reports that a major energy retailer’s 9MFY25 financial performance was largely in line with expectations, despite facing revenue challenges. The group recorded a core net profit of RM282 million for the third quarter of fiscal year 2025 (3QFY25), marking a 22% year-on-year decline. This brings the nine-month (9MFY25) core net profit to RM846 million, a 2% decrease year-on-year, and accounted for 80% of TA’s and 75% of consensus’ full-year estimates.

A third interim dividend of 24 sen per share was also declared, bringing the total 9MFY25 dividends to 66 sen per share, representing a 78% dividend payout ratio.

Performance Review

The group’s overall revenue saw a 2% year-on-year decline, primarily attributed to a 6% year-on-year drop in average selling price (ASP), even as sales volume increased by 4%. Profit Before Tax (PBT) consequently fell 13% year-on-year due to lower gross profit margins, influenced by less favourable Mean of Platts Singapore (MOPS) price trends and broader market conditions.

Both the retail and commercial segments contributed to the challenging performance. Retail revenue was negatively impacted by a 2% year-on-year decrease in ASP and a 1% year-on-year decline in volume. The commercial segment, despite flat revenue, saw its PBT fall 14% year-on-year, pressured by less favourable prices for diesel and jet fuel, notwithstanding higher jet fuel volumes during the period.

Sequential Uplift

Sequentially, the group demonstrated some resilience, with PBT increasing 3% quarter-on-quarter. This improvement was largely driven by higher associate earnings and a lower effective tax rate. Additionally, an increase in sales volume ahead of the anticipated removal of RON95 subsidies for foreigners towards the end of the quarter also contributed positively.

Outlook and Challenges

Looking ahead, the retargeting of RON95 subsidies is expected to have a marginal impact on domestic consumers, thanks to a generous 300 litre per month cap for eligible Malaysian citizens. However, the removal of subsidies for foreigners could somewhat depress overall sales volume in the immediate term.

TA SECURITIES does not rule out the possibility of the government expanding the scope of RON95 subsidy retargeting to domestic consumers. This presents a potential regulatory risk for the sector. Furthermore, the analyst highlights that large-scale fossil fuel subsidies contradict the broader drive for land transport decarbonisation and could pose a challenge should carbon pricing be introduced in the future. The long-term trend of migration towards electric vehicles (EVs) and a more fragmented EV charging market could also structurally impact future valuations.

Analyst View and Recommendation

Given the assessment, TA SECURITIES has maintained its SELL recommendation. The target price remains at RM19.60, which pegs the company’s FY26F core EPS to its long-term mean PER of 18x. The firm believes regulatory risk from any expansion of the RON95 subsidy retargeting scope and the contradiction with decarbonisation efforts remain key concerns.