KUALA LUMPUR (March 19): Gas Malaysia Bhd (KL:GASMSIA) climbed to a fresh high on Thursday after securing approval from the Energy Commission to build a liquefied natural gas (LNG) regasification terminal (RGT) in Kedah, with an estimated cost of up to RM3 billion.
The stock rose as much as 3.49% to RM5.63 before easing to RM5.60, still up 16 sen or 2.94%, with 179,200 shares traded. At this level, the group was valued at RM7.19 billion.
Kenanga Investment Bank said the development is positive, as it provides a new source of long-term recurring income.
The research house estimates the RGT could generate a net present value (NPV) of RM1.71 billion, based on a RM3 billion investment for a six million tonnes per annum (MTPA) facility, 70% utilisation over a 20-year concession, a weighted average cost of capital (WACC) of 6.3%, and a project internal rate of return (IRR) of 10%.
Assuming a 55% stake, the project would add 73 sen per share to Gas Malaysia’s valuation, it said in a note to its clients.
“We believe Gas Malaysia has the financial strength to fund this project, given its low net gearing of 0.09 times,” Kenanga said, adding that the terminal is expected to be ready by 2030 to meet rising gas demand, particularly from data centres.
The research house also expects the recovery in gas volumes following the Putra Heights fire to support earnings growth and sustain attractive dividend yields, despite narrower margins from contract renewals in January 2025.
“We expect the recovery to mitigate the impact of narrower margin spreads,” it said.
Kenanga, which maintained its 'market perform' call, added that Gas Malaysia’s strong market position and earnings visibility, supported by typically three-year contracts and solid free cash flow underpin dividend yields of more than 4%.
Shares of Gas Malaysia have gained over 28% year-to-date. The stock currently has six 'hold' calls and two 'buy' calls, with a consensus 12-month target price of RM4.66, implying a 16.8% downside from its current price.