KUALA LUMPUR: A strong earnings performance in Gas Malaysia Bhd's first quarter is expected to continue in subsequent quarters as higher commodity prices elevate earnings estimates.
The natural gas distributor announced recently that its profit had risen 64.2% year-on-year (y-o-y) and 31.8% quarter-on-quarter to RM91.3mil, which beat analysts' expectations.
Gas Malaysia's revenue for the quarter rose 55% y-o-y but was 8.1% lower q-o-q to RM1.78bil on higher average natural gas selling price that was mitigated by lower volume of natural gas sold.
MIDF Research said it maintains a bullish outlook on the group as it expects hydrocarbon prices to remain high in the near-term albeit with increasing volatility due to the Ukraine war, the ongoing pandemic and decreasing global natural gas inventory.
It added that tightening climate policies will remain favourable to the natural gas industry in the medium-to-long-term.
"The high commodity prices will continue to contribute to GMB’s FY22 earnings in the near term.
"We continue to view GMB positively, on the basis of GMB’s great opening performance for FY22, as well as the full return of LNG shipping and subindustry workforce over lessened restrictions and reopening of international borders," it said in a note.
The research firm has a "buy" call on Gas Malaysia with a revised target price of RM3.46.
Meanwhile, Kenanga Research said it was positively surprised by the strong 1QFY22 results despite the market liberalisation that started in January 2022.
"While the market liberalisation started in Jan this year had put off buying interest previously, we are pleased to see its new tariff setting strategy addressing the earnings risk, at least the 1QFY22 results showed that it worked," it said.
It added that with the rising gas price environment, Gas Malaysia should continue to enjoy a strong gas price environment.
Kenanga maintained "outperform" on the stock with a higher target price of RM3.10.