Petgas: Time to SELL

Results Update

For QE30/9/2014, Petgas's net profit was mixed - dropped 4% q-o-q but rose 10% y-o-y- at RM419 million, while revenue was up 2% q-o-q or 10% y-o-y to RM1.123 billion.

Compared to the immediate preceding quarter (QE30/6/2014), revenue increased q-o-q by RM21 million to RM1.124 billion mainly driven by higher utilities revenue due to higher offtake by customers. re-tax profit decreased q-o-q by RM30 million primarily due to higher cost of revenue and other operating expenses partially cushioned by higher revenue.


Table: Petgas's segmental results for the quarter & YTD


Table: Petgas's last 8 quarterly results


Chart 1: Petgas's last 33 quarterly results

Valuation

Petgas (closed at RM22.00 last Friday) is now trading at a PE of 26x (based on last 4 quarters' EPS of 84 sen). At this PE multiple, Petgas is deemed overvalued.

Technical Outlook

Petgas broke its long-term uptrend line at RM23 in early August. Its immediate support is the horizontal line at RM21.00. Below that, it should find support at the psychological RM20.00 mark as well as the strong horizontal support at RM18.00.
 

Chart 2: Petgas's weekly chart as at Nov 7, 2014 (Source: Tradesignum) 

Conclusion

Based on weaker financial performance, negative technical outlook & demanding valuation, Petgas is rated a SELL.

Note: 
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Petgas.