Sui Northern Gas Pipelines declares final dividend for 2019

Sui Northern Gas Pipelines Limited (SNGP) announced its FY19 financial result today, posting a profit after tax (PAT) of PKR 7,076mn (EPS: PKR 11.16) compared to PKR 11,121mn (EPS: PKR 17.54) in FY18. In 4QFY19, SNGP posted a loss of PKR 744mn (LPS: PKR 1.17) against earnings of PKR 5,141mn (EPS: PKR 8.11) in 4QFY18 amid higher UFG and hit from expected credit loss of PKR 1.5bn. The company also announced a final dividend of PKR 2.

00/share (FY19: PKR 3.50/share).

 Exhibit: Financial Highlights

 PKR mn

FY19

FY18

YoY

4QFY19

4QFY18

YoY

3QFY19

QoQ

Gas sales

  684,626

 446,766

53%

  195,382

 152,716

28%

137,922

42%

Gross profit

    35,796

    26,997

33%

       7,681

    12,214

-37%

      8,362

-8%

Operating profit

    36,926

    26,282

41%

       8,122

    11,296

-28%

    10,030

-19%

Financial costs

    25,777

    10,806

139%

       8,355

      4,413

89%

      7,053

18%

Profit / (Loss) after tax

      7,076

    11,121

-36%

        (744)

      5,141

n/m

      2,106

n/m

EPS / (LPS) PKR

      11.16

      17.54

  

       (1.17)

        8.11

  

        3.32

 

DPS PKR

         3.50

        7.05

  

         2.00

        5.55

  

             –  

  

Source: Company Financials, AHL Research

 Result Highlights

  • Gas sales of the company improved by 53% YoY in FY19 given volumetric growth in RLNG (+26% YoY) as well as hike in natural gas tariff during said year (after a hiatus of 5 years imposed by the prior government) and impact of higher oil prices and PKR depreciation on imported RLNG prices. However, this was slightly offset by lower domestic gas sales volumes (11% decline YoY expected).
  • Finance costs of the company escalated to PKR 25,777mn in FY19, up by 139% YoY led primarily by recognition of late payment surcharge (LPS), expected at PKR ~18bn in FY19. To recall, the company had recognized late payment surcharge (LPS) of PKR 12mn as per 9MFY19 accounts. Albeit, as indicated in the DERR for FY21, LPS on account of state owned entities is a matter of circular debt and should be taken up with the Ministry of Energy, which gives us enough reason to believe that it may have been disallowed in the FY19 FRR as well. Although, it appears that the company has decided to book it and may have given disclosure in contingencies for FY19.
  • The auditor has also drawn attention to receivables from certain government entities stuck due to the circular debt issue (note 26.3; we await final accounts for further details), however, the audit report is not modified.
  • Operating profit of the company witnessed a noteworthy growth of 41% in FY19 as the company has recognized an expected PKR 18bn in allowable LPS; we do highlight that excluding this amount, the company would have posted a massive loss in FY19 due to higher unaccounted for gas (UFG) losses and less than anticipated addition in gross assets.
  • UFG losses are expected to have gone up from 10.9% in FY18 to nearly 11.9% in FY19 (UFG in 3QFY19 was set at 10.44%) while we believe the weighted average cost of gas may have undergone a jump of up to 35% YoY during FY19 (PKR 354/mmbtu in FY18) owed to higher oil prices and PKR depreciation. This, alongside hit of PKR 1.5bn in lieu of expected credit loss, are the main culprits behind loss of PKR 1.17/share booked by the company in 4QFY19. Moreover, we believe variable UFG can be assumed at similar levels to last year, assuming achievement of ~75% of Key Monitoring Indicators (total at 6.9%, including 5% fixed).
  • The company booked effective taxation at 37% in FY19 vis-à-vis 28% in SPLY. (AHL Research)

Share:
Posted in Uncategorized.

Leave a Reply

Your email address will not be published. Required fields are marked *