Petgas: Can recovery begin?

Results Update

For QE31/12/2014, Petgas's net profit increased by 36% q-o-q or 88% y-o-y to RM571 million while revenue was mixed- down 1% q-o-q but rose 8% y-o-y to RM1.112 billion.

Revenue dropped q-o-q mainly driven by lower utilities revenue from sale of steam & industrial gases. PBT increased q-o-q by RM134 million primarily due to higher share of profit from JVs which partially offset higher op. expenses (brought on by impairment of assets of RM31 million).


Table: Petgas's last 8 quarterly results


Chart 1: Petgas's last 34 quarterly results

Valuation

Petgas (closed at RM22.38 yesterday) is now trading at a PE of 24x (based on last 4 quarters' EPS of 93 sen). Its dividend yield is fair at 2.5%. At this PE multiple, Petgas is deemed fairly valued.

Technical Outlook

Petgas broke its intermediate uptrend line, S1-S1 at RM22.50 in early August (go here). Its found support at the horizontal line of RM21.00. With the good results, the stock may attempt to recover above the uptrend line, S1-S1. Meanwhile, the long-term uptrend line, SS lies in wait at RM14.00. I doubt we will see a test of that uptrend line for now.
 

Chart 2: Petgas's weekly chart as at Feb 17, 2015 (Source: ShareInvestor.com) 

Conclusion

Based on improved financial performance, I would re-rate Petgas a HOLD (from a SELL previously). The stock may still be hamper by mildly negative technical outlook & full valuation,

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.