Petronas Dagangan flaunts its assets

Petronas Dagangan is looking 'sexy' to investors, says its chief executive officer

Read more: Petronas Dagangan flaunts its assets http://www.btimes.com.my/articles/toona/Article/#ixzz1YMcAMghX

Turin (Italy): Petronas Dagangan Bhd, the top performing stock on Bursa Malaysia's so far this year, is looking "sexy" to investors possibly because it delivers on its promises and has rosy outlook, its chief executive officer Amir Hamzah Azizan said. The retail arm of national oil corporation Petroliam Nasional Bhd (Petronas) also plans to spend some RM250 million to upgrade facilities and product line-up over the next three to four years. Petronas Dagangan will spend more money if it were to buy Petronas' retail businesses in Indonesia and Thailand to extend its overseas reach, Amir Hamzah added. Petronas Dagangan closed 10 sen higher to RM17.34 last Thursday, bringing its total gain so far this year to 49.8 per cent. Over one year, the stock had gained 67.63 per cent. It is the best performer in the benchmark FTSE Bursa Malaysia KLCI Index, which had dropped more than 4 per cent to date. Interestingly, the index's second best performer is Petronas Dagangan's sister company Petronas Gas Bhd, which has gained 32.25 per cent this year. "We have been reliable and able to deliver what we had promised. Over the years, we have become the leader in two of the four sectors we have been participating. "As we grow, our margins get higher because of economies of scale, and with net profit of nearly RM1 billion, it's hard (for investors) to ignore such company," said Amir Hamzah, who is also Petronas executive vice-president for downstream operations. He spoke to Malaysian reporters during a visit to Petronas' lubricant factory and research and development centre here in Italy last week. Investors could have also attracted with Petronas Dagangan's newly-introduced dividend policy of paying about 55 per cent of its profits, which should reflect its sustainable growth prospects. Petronas Dagangan supplies 60 per cent of commercial demand for petroleum products in Malaysia and more than half of the country's liquefied petroleum gas. It is second only to Royal Dutch Shell plc in the local lubricant market. MIDF Amanah Investment Bank Bhd believes that Petronas Dagangan's future earnings growth would be driven by continuous expansion of its petrol stations. This would be supported by its fuel hydrant system project at the new KLIA 2, which is progressing as scheduled and expected to be completed by April next year. The company, MIDF noted in a recent report, will see stronger performance in the second half of this year as a result of higher fuel consumption on travelling during the festive seasons such as Hari Raya Puasa, Christmas as well as year-end school holidays. Amir Hamzah said Petronas Dagangan may buy sister company, PT Petronas Niaga Indonesia, which runs 19 petrol stations in the most-populated country in Southeast Asia, and another sister company in Thailand as part of efforts to consolidate Petronas group's retail businesses overseas. It has started selling its products in Indonesia to Petronas Niaga, which is wholly-owned by Petronas. Petronas runs two more petrol station businesses in South Africa and Sudan, but acquisition of either operation by Petronas Dagangan is unlikely in the medium term mainly because of their size. In South Africa alone, Petronas owns some 2,000 petrol stations. This translates to a hefty amount if Petronas Dagangan were to buy them over, although it has cash of more than RM900 million at the end of June this year. "We will take a step at a time. Our focus is on Asean first," Amir Hamzah said. Petronas Dagangan, set up in 1982, now has 962 petrol stations in Malaysia, he said. It wants to add 30 more by the end of the year as it strives to raise its market share to 40 per cent from some 32 per cent in the retail segment. It also wants to increase its lubricant market share to 28 per cent from 22 per cent over the next five years. Petronas Dagangan posted a net income of RM869.7 million for the year ended March 31, 16 per cent more than a year earlier.