KUALA LUMPUR: Petronas Dagangan Bhd’s (PDB) system is set for the implementation of diesel subsidy rationalisation and it does not expect it to impact sales volumes given that it is an essential fuel item, Kenanga Research said today.

The investment bank said this was also evident from historical data when petrol and diesel prices were floated in 2019 with no material impact on PDB’s retail sales volumes.

Kenanga also noted that PDB does not expect a substantial earnings contribution from electric vehicle (EV) charging in financial year ending Dec 31, 2024, given the early stage of the EV market.

“Conversion of alternating current (AC) chargers to direct current (DC) chargers is underway to decrease the average charging time for EV users. With 20 available AC charger stations, PDB’s partner, Gentari, will increase capacity in the coming years,” Kenanga Research said in a note today.

It added that PDB will earn income via fees paid by Gentari or profit-sharing arrangements, with no direct operation of the charging stations.

PDB is also growing its Café Mesra outlets at a more measured pace amid a soft market.

Kenanga Research pointed out that its standalone Café Mesra in malls, office buildings and train stations were doing better given higher foot traffic versus those located at the petrol stations.

However, Café Mesra’s contribution to PDB’s convenience division revenue “remains insignificant” currently, it added.

“We like PDB due to its highly cash generative business that translates to high capacity to pay dividends, its strong balance sheet with a sizeable war chest of RM2.8 billion, and growing convenience division’s revenue on stronger demand for Café Mesra.

“However, we are concerned over the long-term prospects of its retail business on the back of EV adoption,” said Kenanga Research. It has a “market perform” on PDB.

Among the risks to its call include volatility in its product prices which translates to margin volatility, lower fuel demand due to a domestic economic slowdown, and low fuel demand stemming from a slowdown in air travel. - Bernama

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