Malaysia: Ron95 Fuel will Not Affect Petronas Dagangan Earnings
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Tuesday, 28 July 2009 |
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 The nationwide introduction of RON95 fuel in Malaysia by September 1
will not affect Petronas Dagangan Bhd's (PDB) earnings, HwangDBS
Vickers Research said.
"Essentially, PDB will continue to earn the same fixed margin under
the automated pricing mechanism (APM) formula," HwangDBS said in its
research note. In the run-up to its introduction as an
alternative and preferred petrol grade, PDB has been testing the market
by offering RON95 at three of its service stations: two in Putrajaya
and one in Kepong, as reported by PetrolWorld.
"Response has been good so far, with 70-75 per cent of its customers
pumping RON95 at these stations. "We believe more motorists will
eventually switch to RON95 after September 1 given that the fuel will
be priced 25 sen per litre cheaper than RON97," HwangDBS said.
HwangDBS said it did not foresee any material impact on PDB's retail
margin, which is expected to be maintained under the APM structure.
"The only key difference arising from the switchover of RON97 to RON95
is lower product cost, thus benefiting the government and not the
petrol operators under the APM system," it said. However,
HwangDBS projected that PDB's overall sales volume would dip further
next year. It dropped 6.6 per cent to 6.5 billion litres in the
financial year to March 31 2009. "This will likely come from
weaker demand from the commercial segment. In particular, diesel and
jet fuel volumes from industrial and aviation customers are projected
to drop due to the tough operating environment.
"We estimate sales volume from the commercial division, which accounted
for 46 per cent of total sales volume last year, to drop 2.9 per cent
year-on-year in 2010, minus 14.8 per cent in financial year 2009," it
said. HwangDBS expects PDB to spend some RM500 million to open between
30 and 35 more petrol stations, upgrade depot facilities and acquire
suitable land for new petrol stations. "It is eyeing new
locations with high population density and along the highways though
prime locations are becoming increasingly scarce.
PetrolWorld 270709
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