KUALA LUMPUR: Petronas Dagangan Bhd (PDB) will continue to be the beneficiary of the reopening of the economy and economic recovery post-COVID19 with ease of restrictions, Hong Leong Investment Bank (HLIB) said.

 

However, the investment bank said at the current level, PDB's share price has gone past its fundamentals and the risk-to-reward ratio was not justified at forward multiples of about 35 times.

 

"Since our contrarian upgrade on PDB on Nov 29, 2021, the group's share price has increased by a decent 10 per cent.

 

"Coupled with the disappointment in the group's recent quarter and our view that investors have already priced in the economic recovery prospects post-COVID19, we downgrade PDB to 'sell' from 'buy' previously with a lower target price of RM15.89 per share," HLIB said in a research note today.

 

Meanwhile, CGS-CIMB said PDB's retail volume growth was boosted by commercial diesel customers, who typically buy diesel at market prices, stealthily switching over to buy subsidised retail diesel from the pump stations as the market price of diesel in the second quarter (Q2) more than doubled year-on-year (y-o-y) and rose 31 per cent quarter-on-quarter.

 

The integrated financial services provider said PDB declared a dividend per share (DPS) of five sen in the first quarter of the financial year 2022 (Q1FY2022) and 11 sen in Q2FY2022 compared with 14 sen in Q1FY2021 and 10 sen in Q2FY2021.

 

It said this brought PDB's DPS for the first half of financial 2022 (1HFY2022) to 16 sen, well below 24 sen it recorded in the 1HFY2021.

 

"We think that this decline in payout is probably due to the working capital squeeze faced by PDB in its retail business due to delays in the government reimbursing PDB for the differential between the fixed and low selling prices of RON95 and retail diesel.

 

"Ultimately, we do expect the government to reimburse PDB as there has been no instance in the past of it failing to do so," it added.

 

In Q2FY2022, PDB's net profit jumped to RM237.68 million from RM82.14 million previously, mainly contributed by higher gross profit from its retail and convenience segments due to higher demand during the period.

 

The increase was further contributed by higher other income following a one-off gain from the disposal of its LPG business in Sarawak but offset by higher operating expenses mainly attributable to dealers' commission.

 

PDB's revenue for the quarter also jumped to RM9.5 billion versus RM5.18 billion y-o-y following an increase in average selling prices by 30 per cent and higher sales volume by 28 per cent.