PetronM - 11 Sept 2017

Petron Malaysia
From info as below.

The petrol retailing companies such as Petron Malaysia Refining & Marketing Bhd, formerly known as Esso Malaysia Bhd, are still expected to post strong revenue growth into early FY18 despite a tapering off in the upward surge in global oil price in the first half (H1) of 2017.

Streets say oil price in H1 was 30% to 40% higher than the previous year. This rise resulted in Petron’s revenue growing by 42% (during the same period).

Historically, the change in Petron’s revenue mirrors the trend in oil price changes, especially when the oil price is converted to ringgit. However, unlike previous years, Streets believe the one difference to Petron’s advantage now (Sept 2017) is the current weekly adjustment of the retail petrol price. In an uptrend (oil price) scenario, the weekly adjustment means petrol dealers are able to charge higher price faster compared with monthly adjustment.

The mechanism of weekly adjustment to the retail petrol price was enforced in end March 2017, switching from a monthly adjustment. The oil price then was still on a downtrend.

The positive impact due to switching to weekly adjustment should only be felt in Petron’s third quarter results. Talks of daily adjustment to replace the current weekly adjustments, if materialises, will be an added bonus.

However, observers are cautions the need for the retail operators to manage its stock better if the industry opts for the daily adjustment. Many retail petrol stations are not ready for it. The price will be more volatile unless the price stabilises.

Observers note that as the economy improves, the increase in economic activities, arising from higher demand for transportation and so forth, will boost revenue growth. This should offset any dampened revenue growth due to a slower rise in oil price in the second half 2017.

The rollout of mass rapid transit (MRT) services is also is not expected to have any substantial negative impact on Petron’s bottomline. Phase one (of the MRT from Sungai Buloh to Semantan) began operations in December 2016. Any impact would have been obvious in Petron’s H1FY17 results. Even if it did, the negative impact has been offset by the higher oil price.

Phase two started in July 2017. Even with phase two kicking in and servicing a wider area, the MRT is only confined to the Klang Valley, whilst Petron’s operations are nationwide.

In 2016, Petron completed 18 new stations across the country, growing its network to 580 stations currently (Sept 2017). The petrol service stations are also expected to enhance competitiveness to the next level.

The price is regulated. However, the various petrol stations are already fiercely competing for customers by making various [promotion] offers. Currently, industry observers believe Petron has the edge due to the manner in which Petron users get one point for every RM1 spent. Some petrol stations are now throwing in other gifts such as tissues and so forth.

Observers think these promotions will not slow down but will become more aggressive, to capture a larger share of the market.

Besides higher oil price, Petron’s earnings growth will also be coming from the complementing products and services such as the car service, food and drinks.

For half year ended June 2017, Petron recorded a hefty 42% revenue growth to RM4.97 bil. Its net profit rose by over 155% to RM199.5 mil. Revenue growth, yoy, for Q1 ended March 2017 is higher at 54% compared with Q2’s 32%.