KUCHING (June 2): Dayang Enterprise Holdings Bhd (Dayang) and Uzma Bhd (Uzma) will benefit from the expected resumption of capital spending by Petroliam Nasional Bhd (Petronas), analysts reiterate.
The research arm of Kenanga Investment Bank Bhd (Kenagna Research) has summarized that Petronas committed an investment of RM7.4 billion in the first quarter of fiscal year 2022 (1QFY22).
While this is a 12% year-over-year (yoy) increase, the investment figure also represents a 48% quarter-over-quarter (qoq) decline – although Kenanga Research noted higher seasonal investments during Q4.
“While the year-over-year increase in investment is a positive, we believe that more investment investment needs to be made in the coming quarters to meet full-year investment expectations of at least 40 to RM50 billion,” the research arm said.
“This is supported by the group’s healthy net cash position of around RM91 billion (up 35% yoy, up 65% yoy).
“Petronas says domestic capital spending in the quarter increased 30% year-over-year and is gradually on track to return to 2019 levels.
“Furthermore, dividend commitments remained stable at RM25 billion in 2022 (of which RM3 billion has already been paid in the quarter), despite the better earnings – thus constituting the group’s war chest for new necessary investments in the periods to come.”
According to Kenanga Research, with an expected recovery in Petronas capital spending going forward, local activity levels are also expected to see a slight recovery.
“Earlier in our reading of Petronas’ latest business outlook, we highlighted Dayang as a major beneficiary, given the expected increase in offshore maintenance, construction and modification (MCM) and HUC works.
“Meanwhile, we believe that Uzma could also benefit from the increased level of brownfield activity – particularly in a higher oil price environment, as producers would have more incentive to improve well production. .”