For QE31/12/2014, Gasmsia's net profit dropped 49.6% q-o-q or 42.0% y-o-y to RM23.3 million while revenue rose 33.7% q-o-q or 29.2% y-o-y to RM781 million. The drop in profit is due to higher cost of gas sold as higher volume of LNG sold had to be purchased at market price. This resulted in an erosion in the existing spread of RM2.02/mmBTU and a lowering of its profit.
As a hike in the selling prices is unlikely in FY2015, the reduced profit margin will continue unless the volume of gas sold is reduced. Maybank IB expects the FY15/16 earnings to drop further. It revised its earning forecast by 58%/29% to 4.0/7.6 sen. Along with that revision, its TP was reduced to RM3.00. This is based on its report dated 13/2/2015.
Diagram 1: Gasmsia's top-line & bottom-line for the past 11 quarters
Diagram 2: Gasmsia's cashflow for the past 11 quarters
Valuation
As a hike in the selling prices is unlikely in FY2015, the reduced profit margin will continue unless the volume of gas sold is reduced. In a report dated Feb 13, 2015, Maybank IB expects the FY15/16 earnings to drop further. It revised its earning forecast by 58%/29% to 4.0/7.6 sen. Along with that revision, its TP was reduced to RM3.00 (based on DCF valuation with WACC at 7.3% and long-term growth at 2%).
Table: Gasmsia's Financial Highlights & Forecast (Source: Maybank IB)
Technical Outlook
Gasmsia broke its uptrend line, SS support at RM3.50 in November last year. Its immediate support & resistance are at the horizontal lines at RM2.55 & RM2.75.
Chart: Gasmsia's weekly chart as at Feb 17, 2015 (Source: ShareInvestor.com)
Conclusion
Despite the poor financial performance, demanding valuation & mildly negative technical outlook, Gasmsia is rated a HOLD. However, if the stock were to pullback to its horizontal support of RM2.55, it could be a long-term buy.
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, Gasmsia.
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