MMC Corporation Bhd’s 41.8%-owned subsidiary, Gas Malaysia Sdn Bhd, yesterday signed an agreement with Petroliam Nasional Bhd (Petronas) for the national energy company to supply Gas Malaysia an additional 82 million standard cubic feet per day (mmscfd) of natural gas.
In a statement, MMC said pursuant to the second supplemental gas supply agreement, the additional supply of natural gas would be effective until Dec 31, 2011. It said the agreement would contribute positively to the earnings of the group.
The agreement is in addition to the earlier one signed in August 2009 for Petronas to sell 300 mmscfd of natural gas to Gas Malaysia.
The 300 mmscfd agreement would enable Gas Malaysia to provide long-term supply of natural gas to its industrial users, which would incur lower energy costs from using competitively priced natural gas, MMC Corp had said in August.
Gas Malaysia is owned by MMC-Shapadu (Holdings) Sdn Bhd (55%), Tokyo Gas-Mitsui & Co (Holdings) Sdn Bhd (25%) and Petronas Gas Bhd (PetGas) (20%). MMC owns 76% of MMC-Shapadu, thus owning an effective interest of 41.8% in Gas Malaysia, which is treated as a subsidiary in MMC’s accounts.
Meanwhile, in a report yesterday, AmResearch maintained its buy call on Petronas Gas at RM10.16, with an unchanged discounted-cash flow-based fair value of RM11.30, following news over the weekend that Petronas had shut down oil platforms and production pipelines off the east coast of peninsular Malaysia in an emergency procedure after a thin layer of oil was sighted in nearby waters.
In its view, AmResearch said the emergency shutdown was unlikely to have a significant impact on PetGas’ valuations. Petronas indicated that the facilities, located 240km offshore Malaysia, were operated by its production-sharing contractors — upstream unit Petronas Carigali, ExxonMobil Exploration and Production Malaysia and Newfield Peninsular Malaysia.
“Our channel checks indicate that the affected oil field also produces some 100-150 mmscfd of gas. This represents up to 7% of PetGas’ FY10 output of 2,088 mmscfd. For now, we understand that Petronas is replacing the lost gas production by increasing output of other fields off Peninsular Malaysia,” AmResearch said.
AmResearch said the stock’s calendar year 2010 forecast PE of 15 times was below its past three-year average of 18 times but still at a premium to the oil and gas sector’s 10 times, due to its defensive earnings profile. Gross dividend yield is attractive at 6%, it added.
This article appeared in The Edge Financial Daily, July 13, 2010.
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