Moody’s affirms Petronas’ ‘A1’ rating

PETALING JAYA: Moody's Investors Service which affirmed Petroliam Nasional Bhd's (Petronas) 'A1' rating, today flagged potential changes in government policies for oil and gas sector as credit negative for the group, which is currently being challenged as the sole owner of the country's oil and gas resources.

The Sarawak government is making a play for direct authority over oil and gas resources in the state. In July, the Gabungan Parti Sarawak-led State Assembly passed the Oil Mining (Amendment) Bill 2018 which requires only one licence for exploration, prospecting and mining of oil and gas.

After Petronas failed in June to get the courts to declare it as the sole owner and authority of oil and gas resources in the country, it has been silent on the matter.
The federal government has thus far not weighed in on the issue.

Moody's senior vice-president Vikas Halan said in a statement that potential changes to government's policies for the oil and gas sector could affect Petronas' position as the sole owner of the country's petroleum resources, and increase the royalties paid on its upstream oil and gas production.

“While these changes could be credit negative for Petronas, their implementation will take time and we expect the group to have the financial flexibility to reduce dividends and capital spending to minimise any adverse impact on its credit profile,” Halan said.

Nevertheless, he said Petronas' financial profile and liquidity position are stronger than those of its higher rated global peers, and it thus has a cushion to absorb some deterioration in its credit metrics before its ratings face downward pressure.

Petronas' gross financial leverage, as measured by its total debt/ earnings before interest, taxes, depreciation, and amortisation (ebitda), improved to 0.7 times for the 12 months ended March 2018 from about 1.0 times for 2016.

Moody's said it expects Petronas to maintain its gross financial leverage below 0.8 times-1.0 times for the next two to three years.

The company's total debt/ total capitalisation remains conservative at below 15% as of March 2018 and Moody's expects this to be maintained at 15% to 20% over the next two to three years compared to its downgrade threshold of above 30% to 35%.

The company's net adjusted cash position, which had increased to RM90 billion as of March 31, 2018 from RM42.8 billion on Dec 31, 2016, will likely be maintained at a level of RM80 billion to RM100 billion over the next two to three years based on Moody's current oil price assumption of US$45 to US$65 per barrel through 2019.
Moody's said this also incorporates its expectation of gradual increase in dividends to the government to RM25 billion by 2020.

The rating agency has affirmed the A1 rating on the senior unsecured notes issued by Petronas Capital Ltd, the (P) A1 rating on the US$15 billion (RM61.6 billion) medium-term note programme and the A1 rating on the sukuk issued through Petronas Global Sukuk Ltd.

Moody's said the rating affirmation indicates that the group will maintain its strong operating profile, credit metrics and liquidity as it continues to generate free cash flow in an improved oil price environment and as it nears the end of its capital spending cycle.

Moody's said the stable outlook also reflects its expectation that Petronas will maintain its strong credit profile over the next 12 to 24 months. It further reflects Moody's expectation that the group will continue to adjust its spending on operating and capital expenditure to protect its financial position.

The national oil company's rating is supported by its large-scale hydrocarbon reserves; strong financial metrics; conservative financial policies; and solid liquidity profile.

Eita Q3 earnings more than double

PETALING JAYA: Eita Resources Bhd, which bagged a RM67.22 million job today, saw net profit for the third quarter ended June 30 more than double on higher revenue, unrealised foreign exchange gains and reversal of provisions.

Eita’s 60%-owned Transsystem Continental Sdn Bhd (TSC) was awarded a RM67.22 million contract by Sarawak Energy Bhd (SEB) subsidiary Syarikat Sesco Bhd is to carry out the Kemena 132kV substation & Kemena 275kV extension project.

Meanwhile, Eita saw its net profit for the third quarter ended June 30, 2018 double to RM3.65 million from RM1.81 million a year ago, in tandem with the higher revenue, unrealised foreign exchange gain on the fair value valuation of the forward exchange contracts and reversal of provision for allowance for doubtful debts.

Its revenue rose 11% to RM67.84 million compared with RM60.97 million in the previous corresponding quarter, mainly due to higher revenue from the services segment.

For the nine months period, Eita’s net profit fell 19% to RM14.27 million from RM17.72 million a year ago in tandem with the lower revenue, higher inventories written down to net realisable value in the marketing and distribution segment and foreign exchange loss.

Its revenue dropped 5% to RM199.40 million compared with RM210.52 million in the previous year’s corresponding period mainly due to lower revenue from manufacturing and marketing and distribution segments.

“The general business environment remains uncertain. Nevertheless, with the current order book and ongoing projects in hand and barring any unforeseen circumstances, the board of directors expects the group to achieve satisfactory results for this reporting financial year,” Eita said.

Dayang bags three contracts

PETALING JAYA: Dayang Enterprise Holdings Bhd’s subsidiary Dayang Enterprise Sdn Bhd has bagged three contracts for the provision of Pan Malaysia Maintenance, Construction and Modification for an undisclosed contract sum, for a period of five years.

The group told the stock exchange that the three contracts are from Murphy Sarawak Oil Co Ltd and Murphy Sabah Oil Co Ltd, Repsol Oil & Gas Malaysia Ltd and Kebabangan Petroleum Operating Company Sdn Bhd, respectively.

Each of the contracts is expected to go on between July 17, 2018 and July 16, 2023.

The value of the contract is based on work orders issued by the companies throughout the contract duration and shall include any or all other work and services which is generally related to the scope of works in the contract at a fixed schedule of rates.

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Bumper first half for HSL as profits for 2Q18 reaches RM154 million

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Hock Seng Lee’s second quarter earnings up 44% on higher revenue

PETALING JAYA: Sarawak-based infrastructure company Hock Seng Lee Bhd (HSL) saw its net profit for the second quarter (Q2) ended June 30 jump 44.3% to RM14.1 million, from RM9.78 million in the previous corresponding quarter, due mainly to higher revenue.

Revenue for the quarter more than doubled to RM154.2 million, compared with RM75.9 million in the same period last year.

For the six months period, its earnings rose 33.2% to RM27.9 million, against RM20.9 million a year ago, while revenue surged 67.4% to RM286 million, from RM170.8 million previously.

The construction segment contributed RM138.69 million or 90% while the property development segment registered a contribution of RM15.56 million or 10% to the group's revenue during the quarter.

The property sector has RM287 million worth of projects in hand, HSL said in a statement.

This year, it said, it has launched RM50 million worth of property projects comprising gated residences for Phase 2 of Precinct Luxe at its 200-acre La Promenade mixed development as well as industrial lots at Phase 3 of its Vista Industrial Park.

HSL has declared a first interim single-tier tax exempt dividend for 2018 of one sen per ordinary share, payable to shareholders on Oct 10. The dividend entitlement date is Sept 19.

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RAM Ratings places Sarawak Energy’s issue rating on positive outlook

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