MARC Ratings has affirmed its MARC-1IS/AAAIS ratings on PETRONAS Dagangan Berhad’s (PDB) RM10.0 billion nominal value Islamic Commercial Papers (ICP) Programme and Islamic Medium-Term Notes (IMTN) Programme. The ratings outlook is stable.
The affirmed ratings reflect PDB’s well-established track record and its very strong market position in the domestic retailing and marketing of petroleum products. The ratings also incorporate PDB’s strong balance sheet and liquidity position. MARC Ratings views PDB’s strategic importance to the Petroliam Nasional Berhad (PETRONAS, AAA/Stable) group, being the retail and marketing arm of PETRONAS for its downstream petroleum products, as a credit positive.
PDB has an extensive retail distribution network of over 1,000 petrol stations across the country. The company added 10 new petrol stations in 2022 and plans to add 10-15 petrol stations a year going forward. In the commercial segment, PDB has a commendable market share of jet fuel sales. The group’s longstanding relationships with major local carriers coupled with its solid supply capabilities underpin strong recurring contract orders.
In 3Q2023, PDB’s retail and commercial sales volumes rose by 7.0% and 12.0% due to continued recovery in domestic demand and international travel. However, its revenue grew by a modest 0.8% y-o-y to RM27.5 billion, moderated by a 15.0% fall in the average selling price in the commercial segment amid lower crude oil prices during the period. Pre-tax profit increased to RM1,045.7 million as margin broadened to 3.8%. Cash flow from operations (CFO) improved to RM781.4 million due to higher receipts of subsidy receivables. Liquidity position remains strong with cash and cash equivalents of RM2.7 billion as at end-September 2023.
PDB’s borrowings have historically been modest, standing at just RM152.9 million as at end-September 2023, with a very low debt-to-equity ratio of 0.03x. The rating agency does not anticipate any significant increase in PDB’s borrowings in the near to medium term, considering the company’s moderate capex requirements of about RM450 million p.a. relative to its strong CFO generation.