Higher prices to bolster Gas Malaysia profit

PETALING JAYA: Gas Malaysia Bhd is expected to see a 16% earnings uplift in the financial year 2027 (FY27), driven by higher gas prices linked to 2026’s crude oil spikes and a rebound in volume, says RHB Research.

It said Gas Malaysia benefits from elevated crude oil prices, as its shipper subsidiary, Gas Malaysia Energy and Services, earns a fixed margin on Malaysia Reference Price (MRP), which tracks Brent crude oil prices with a nine-month lag.

“All in, we forecast MRP to increase 28% year-on-year (y-o-y) in 2027, to reflect the 21% increase in Brent crude oil prices this year, before falling 11% in 2028 on moderating oil prices.”

It projected the group’s FY26 earnings to grow 4% y-o-y, reflecting regulated tariffs which will mitigate lower volume and MRP.

It anticipates FY28 earnings growth to reduce to 1% on lower MRP.

Regulated tariffs are expected to provide stable earnings for its regulated business, which contributes 40% of group profits, as the company earns a fixed regulated return on an expanding regulated asset base (RAB), the research house said.

Gas Malaysia, as the sole operator of the Natural Gas Distribution System network, received a 20% base tariff hike for the Regulatory Period 3 (RP3) which spans 2026 to 2028.

“We estimate a 25% increase in regulated capital expenditure (capex) approval for RP3, which should see its RAB grow to RM2.7bil by end-2028,” it added.

RHB Research initiated coverage on the company with a “buy” recommendation and a sum‑of‑parts-based target price of RM6.50.

It said the group’s new regasification terminal 4 (RGT4) project in Yan, Kedah, which has been approved by the Energy Commission, offers scope for upside.

The RGT4 project, which is targeted for commissioning by 2030, is said to be critical to ensure stable gas supply to new gas plants coming online.

The research house believes RGT4 will be a key gas supplier to Malakoff’s upcoming 2.8GW gas plants.

“We see potential upside from the allocation of gas capacity to Gas Malaysia’s shipper division.”