KUALA LUMPUR: The Putra Heights fire on April 1 is expected to result in a one-off impairment of at least RM18mil to RM25mil for Petronas Gas Bhd (PetGas), according to MIDF Research.
“Financially, we estimate that there will be a one-off impairment of roughly RM18-25mil minimum from PetGas. This includes revenue loss for the affected pipeline (10-15%), damage repair (25-30%), public compensation (25-35%) and reputational management.
“However, it should be noted that this is our minimum estimate and
is highly dependable on the type of damage caused (medical, property etc) and recovery time,” MIDF said in a report.
The research house also estimated an additional cost of at least RM5mil for compensation to industrial customers if their operations are directly affected by the damaged pipeline.
This includes delays, diverted gas sources, and other disruptions, as explosion-related repairs can take months.
If the customers are not directly impacted, compensation may only be hours or days’ worth, it added.
“At the current juncture, we estimate the financial impact of the pipeline to be circa 1-1.5% of PetGas’ total earnings.
“We opine that this event will drag share prices down to approximately -1.8% to -2.1% in the short term,” the research house said.
It noted that the long-term impact will depend on how effectively PetGas manages the aftermath. Any significant one-off costs could also affect its future earnings.
MIDF maintained its “buy” call on PetGas with a target price of RM18.67.
It noted that PetGas had responded well to the initial shutdown of the damaged pipeline and was expected to conduct due diligence to ensure PGU resumed operations within the planned recovery timeline, safely and cost-efficiently.
