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Reports Malaysia

Malaysia stock market and companies daily report (April 09, 2014)

April 9, 2014, Wednesday, 05:44 GMT | 00:44 EST | 09:14 IST | 11:44 SGT
Contributed by Shares Investment

Petronas Splits Exploration And Production Division

- Petroliam Nasional (Petronas) will be splitting its exploration and production division into domestic and international segments to make the business more focused and accountable. The national oil giant will be benchmarking this move against super oil majors Shell, ExxonMobil and Total.

- The latest move is part of Petronas’ plan at propelling ownership and accountability to empower businesses so that it is able to concentrate more on its domestic and international roles that require different skill sets, considering that it competes internationally with global oil giants, whereas locally, it is the owner of hydrocarbon deposits.

- Petronas has set for itself aggressive targets, including an average production growth of 3.5 percent per year up to 2020 and a reserve replacement ratio (RRR) of 1.1 times. A ratio of 1.1 times indicates that Petronas has a good balance between hydrocarbons produced and discovered.

Significance: Petronas achieved a RRR of 1.3 times in 2013 and ranks fifth on the global ranking of oil and gas firms, with ambitions of moving up into fourth position.

CIMB Research: Positive On Perdana Petroleum’s Outlook

- After a strong earnings turnaround in FY13, Perdana Petroleum is expecting the positive momentum to continue in 2014, underpinned by improvement in its operating environment as charter and utilisation rates are seen rising.

- The company is on a fleet expansion programme which saw it deliver its 17th vessel, a work barge named Perdana Resolute and is set to add another, named SK312, in October.

- The utilisation rate of Perdana’s vessels rose to a robust 84 percent in 4Q13. With the newly added Perdana Resolute, the average age of its young fleet is reduced to less than four years and around 65 percent has secured long-term charters.

Significance: CIMB Research has an “Add” rating with a target price of RM2.20 on the firm, noting that the stronger earnings uptick expected in FY14 is a potential re-rating catalyst.

Maybank IB Research Downgrades Gamuda To “Hold” Rating, Target Price RM4.45

- The invocation of Section 114 of the Water Services Industry Act (WASIA) 2006 has caused Maybank IB Research to downgrade Gamuda to “Hold” rating and cut its target price to RM4.45 from RM5.30 previously.

- Though the commencement date is yet to be revealed, the invocation of WASIA allows the federal government to assume control of the operations of the water assets, but it may not entail the transfer of ownership of the water assets.

- In a note, Maybank IB says the target price downgrade comes in consideration of Gamuda’s 40 percent stake of the RM250 million offer value for Syarikat Pengeluar Air Sungai Selangor (SPLASH) and zero value for Gamuda Water.

Significance: Maybank IB Research caution against the potential one-off divestment loss to the tune of RM0.32 per share in either FY14 or FY15 arising from the difference between the Selangor government’s latest offer valuation of RM250 for SPLASH and Gamuda’s estimate of SPLASH’s net asset value of RM2.1 billion last year end.