Petronas Dagangan is the principal domestic marketing arm of Petroliam Nasional Berhad (PETRONAS) for downstream petroleum products. Think Petronas gas stations,Kedai Mesra and the cooking gas cylinders in the kitchen.
Retail (50%) and Commercial business(31%) contributes 81% of Petdag's net margin.
Retail is the key business, contributing almost 50% of group's net margin.
Retail market share maintained at 32%.
995 service stations. 617 Kedai Mesra. 22 new service stations in FYE2011.
Plans to continue expanding service station network as it aims to take market leadership.
Non-fuel income, Kedai Mesra, increased 14% from last year.
Commercial Business’market leadership of more than 60%. Contributes 31% of Petdag's net margin.
Commercial Business sales volume grew 3.8%. Prominent in aviation sector.
Dominant market share of 70% at KLIA and other major airports.
Market leader in LPG (50.7%)
Lubricant market share 22%.
Sale volume improved by 9%.Partnership deals with Proton Edar, Naza Chevrolet, Cycle & Carriage and Perodua to supply lubricants.
Growth in FYE2011
Retail- Maintain
Commercial -3.8%
Lubricants - 9%
LPG - 2%
Management has the ambition to take market leadership in 2-5 years time.
How?
Improve service in retail arm.
For commercial business, concentrating on new opportunities coming out of the economic development corridors under the 10th Malaysia Plan and the government’s Economic Transformation Programmes (ETPs).
For LPG, which is matured market, Petdag will include innovative marketing and tighter cost control.
Petdag took a hit in 2009, effects from the Great Recession; earnings declined as much as 12%. The oncoming global recession 2012 doesn't bode well with this stock. The commercial chunk contributes quite significantly to Petdag's bottomline. Aviation isn't gonna take off to high grounds in such gloomy economy. The best outcome is very slow growth in the US. Recession is already a sure thing in Europe.
Moreover, Petdag at 17.20 is rather over-valued. It factors in high growth rate which I don't think is achievable under such unfavorable economic conditions.
The growth story by the management doesn't even jump at you. Nothing major happening. Just improving services and operations.
Overall, I like Petdag, but not at its current valuation.
Update, 30-Jan-2012
http://www.theedgemalaysia.com/highlights/200078-2012-ceo-outlook-series-pdb-to-boost-presence-beyond-msia.html
In 2012, Petdag will explore growth beyond Malaysia, starting with regional opportunities that will complement commercial goals.
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