Recently, many clients would like to find out details about Gas Malaysia Berhad (GMB). After doing some research, I try to gather the information from bursa's web, below are the summary.
GMB is one of the ISO certified company who operate the distribution of natural gas and liquefied Petroleum Gas to home, commercial business and industries.The company source it's natural gas from Petronas.
Who is the competitor?
Only 2 company in this industry, GMB
and Petronas Gas Berhad (PGB). PGB involve in distribute to customer who consume >
2 MMScfd, whereas GMB involve those customers less than 2 MMScfd.
GMB can consider as one of the monopolistic business in
the country. However, GMB can not simply raise the selling price, hence, it would be something similar to PBA or TENAGA upon listing.
Is the company borrow a lot of money?
No gearing, meaning the company do not have any borrowing. However, the IPO is offer for sales, hence none of the proceed receive from this IPO will go into GMB's book.
Who is GMB's customer?
GMB have about 33,600 customer base, but 94% of sales actually came from 5 main customers from the industry, they are Nippon Electric Glass, Malaysian Sheet Glass, Hartalega, Fatty Chemical and Central Sugars Refinary.
Currently, GMB's market share is about 13.50%, in other words, there's plenty of room to grow if the management do their job, hopefully!
As usual, this is the most important part. GMB record profit of 229 million last year (2011), with total share of 1,284 million (after IPO), we can calculate the total EPS (earning per share) is about 18 sen. Using the IPO price of RM2.20, the PE is about 13x. I know, fom the surface, ya, very cheap, if compare to Tokyo Gas and PGB which currently trade at about 20x PE. However, this is before the revise selling price, remember the profit margin going to cut down by about 44% starting at current financial year.
What the share holder can expect?
GMB has a dividend payout policy of at least 75%, hence, it's about 13 sen if GMB can maintain last year's earning. Wait, since the profit margin going to reduce by at least 44% as per the latest contract with government which take effective from June 2011, meaning EPS for next year will be around 12 sen and dividend is about 9 sen only. Base on this figure, 20x PE is about RM2.40, any price above this level is consider high end! Due to the overall market is not so good at the moment, I will recommend "sell" on any price above this level for the time being.