KENANGA MAINTAINS 'OUTPERFORM' CALL ON PETRONAS DAGANGAN

KUALA LUMPUR, May 24 (Bernama) -- Kenanga Investment Bank Bhd (Kenanga IB) has maintained its “outperform” call on Petronas Dagangan Bhd (PetDag) on the company’s readiness for the transition to a targeted fuel subsidy system and its outlook in fiscal 2024.

The investment bank said PetDag is well prepared for the transition to a targeted fuel subsidy system with its fleet card system, which includes both physical fuel cards and a cardless system accessible through SETEL, a mobile app developed by PetDag. “As for its outlook for FY2024, it is underpinned by modest gross domestic product growth...with stable volume growth across its divisions,” it said in a research note today.

Kenanga IB noted that PetDag is not overly concerned about the impact of diesel subsidy rationalisation as it believes it will only prompt certain customers to source diesel from its commercial division, against its retail division previously (with a neutral impact on the total volume). “It is also optimistic about its aviation fuel business, which will be buoyed by the recovery of air traffic in Malaysia, which could reach 98 per cent of pre-COVID-19 levels in 2019,” it added.

It noted that PetDag has a strong balance sheet with a sizeable “war chest” and a growing convenience division revenue due to stronger patronage of Café Mesra.

However, risks to its call include a structural decline in demand for fuel such as a switch to public transport and the adoption of electric vehicles post-fuel subsidy rationalisation. Other risks are the global economy slipping into a recession, a derailing in the recovery of the global air travel industry and an inability to rein in rising operating costs.

Kenanga maintained the target price of PetDag at RM23.70.

At 11.22 am, the counter was down 16 sen at RM20.26 with 76,700 shares transacted.

-- BERNAMA