Petronas Gas: Maintain Hold - Partners SEB For Sabah Regas Project

• Reiterate HOLD; DCF-based TP of MYR20.20. Petronas Gas (PGas) will partner Sabah Energy Corporation (SEC) for the Lahad Datu regas project (80:20 JV). The MYR1b project is likely to commence operations in 2015; we estimate contributions of only 2% to PGas' bottom line. We see limited upside to its share price, for we believe most of the medium-term positives (i.e. Melaka regas project and Kimanis power plant) have been priced in. Valuations are less palatable relative to Gas Malaysia, whose higher dividend yield makes it a more defensive O&G play.

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Source: Maybank Research - 11 Sept 2012