RHB initiates Gas Malaysia at buy with RM6.50 target on oil price upside
RHB Research started coverage on Gas Malaysia Bhd with a buy call and a RM6.50 target price, citing the gas distributor’s earnings leverage to higher crude prices and its planned fourth regasification terminal.
Source: The Edge Malaysia · July 24, 2026 at 5:17 AM · AI-assisted report
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MALAYSIA, 24 JULY 2026 —
RHB Research started coverage on Gas Malaysia Bhd with a buy call and a RM6.50 target price, citing the gas distributor’s earnings leverage to higher crude prices and its planned fourth regasification terminal.
Market Impact
The research house set a sum-of-parts target that implies a 25% premium to Gas Malaysia’s RM5.19 closing price on July 23 and a 5% dividend yield for the financial year ending December 31, 2027. RHB said the stock benefits from regulated tariffs and a growing dividend stream while the shipper division’s margins rise with the Malaysia Reference Price, which tracks Brent crude with a nine-month lag.
“We like Gas Malaysia as a beneficiary of higher gas prices and developer of a new regasification terminal 4 (RGT4) project,” RHB said. “At the same time, regulated tariffs provide a stable, regulated earnings base and healthy dividend yield.”
Gas Malaysia earns a fixed margin on the MRP-linked tariff, so higher Brent crude directly lifts its shipper revenue. RHB expects the MRP to jump 26% year-on-year in the fourth quarter as the nine-month lag catches up with Brent’s rebound in the second quarter. The house forecasts a 28% MRP increase in 2027, reflecting a projected 21% rise in Brent prices in 2026.
The company also secured Energy Commission approval to build the RM2.1 billion RGT4 in Yan, Kedah, with commissioning targeted for 2030. RHB values the project at 49 sen per share in its sum-of-parts model, assuming a 6.9% weighted average cost of capital and a 70% ownership stake. The terminal will supply Malakoff Corp Bhd’s upcoming 2.8 gigawatt gas plants, which RHB rates buy with a RM1.06 target.
“Assuming RM2.1 billion capex, 6.9% WACC and 70% stake, we have imputed a 49 sen/share valuation from the project into our SOP,” RHB said. “We see potential upside from the allocation of gas capacity to Gas Malaysia’s shipper division, which could result in another 10% upside from our TP.”
Regulatory Period 3 tariffs, approved at 20% for 2026-2028, give Gas Malaysia a stable earnings foundation. The company operates Malaysia’s sole natural gas distribution system and earns a fixed return on an expanding asset base. RHB estimates a 25% increase in regulated capital expenditure for RP3, lifting the regulated asset base to RM2.7 billion by the end of 2028. The house forecasts FY2026 earnings up 4% year-on-year as higher tariffs offset lower volumes and MRP.
RHB projects FY2027 earnings to rise 16% on higher MRP and volume recovery, before edging 1% lower in FY2028 as MRP moderates. Net margins are expected to stay at 6% across the period, with a 6% compound annual earnings growth rate from 2025 to 2028. The RM6.50 target blends an 18-times price-to-earnings multiple on FY2027 recurring earnings and a RM634 million discounted cash flow value for RGT4.
RHB flagged three key risks: lower MRP than forecast, competition from rival shippers that could crimp volumes, and delays in commissioning the RGT4 terminal.
Related: Gas Malaysia · Malaysia