Page 1 of 11. INDUSTRIAL PRODUCTS OIL AND GAS - REFINING & DISTRIBUTION Company Description: SEPARATING NATURAL GAS INTO ITS COMPONENTS & STORING.

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1 Page 1 of 11 Fundamental Analysis for PETRONAS GAS BERHAD 82% A Company Name: PETRONAS GAS BERHAD Board: Main Board Stock Code (Bursa): PETGAS FBMKLCI: TRUE Bloomberg: PTG:MK Reuters: PGAS.KL Industry: Sub-Sector: INDUSTRIAL PRODUCTS OIL AND GAS - REFINING & DISTRIBUTION Company Description: SEPARATING NATURAL GAS INTO ITS COMPONENTS & STORING. Date of Analysis: 7-Jul-11 Price: Income Statement: Year over year, Petronas Gas Bhd has been able to grow revenues from 3.2B to 3.5B. Most impressively, the company has been able to reduce the percentage of sales devoted to cost of goods sold from 63.43% to 49.3%. This was a driver that led to a bottom line growth from 94.9M to 1.4B. Balance Sheet: Petronas Gas Bhd has a strong Balance Sheet and has consistently grown its cash reserves over the last Four years to total 2.8B. Accounts Receivable are among the industry's worst with days worth of sales outstanding. This implies that revenues are not being collected in an efficient manner. Last, inventories seem to be well managed as the Inventory Processing Period is typical for the industry, at days. Shareholding Analysis: CARTABAN NOM-PETROLIAM NASIONAL BHD and EMPLOYEES PROVIDENT FUND BOARD are the major shareholder. Future Growth Drivers: Sales volume increase contributed mainly by higher cylinder sales driven through aggressive marketing activities and enhanced customer services. The Lubricant Business volume and revenue growth was contributed by aggressive marketing and wider distribution channels, clinching partnership deals with major automotive dealers such as PROTON, Chevrolet and Cycle & Carriage. Potential Risks: Annual Report 211, Page 99

2 Score Card Item Rating Score Remarks 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax 9 36 increasing in the past 5 years Net Cash from Operations increasing in the 8 24 past 5 years EPS increasing in the past 5 years Y and 5-Y growth rate are good Growing/consistent revenue in EPS, revenue 5 2 and net profit in the last 5 quarters The current quarter's EPS is up more than % from the same quarter the year before. 2 - Sustainable Competitive Advantage & Strong Future Growth Drivers 2.1. Strong brand, monopoly or barriers to entry Gross Profit Margin (> 4%) & Net Profit 1 4 Margin (> 1%) 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next years 2.5. ROIC > 15% Strong future growth drivers Potential Risks Conservative Debt 3.1. Long term debt < 4 times Net Profit Debt/Equity Ratio < Current Ratio > Healthy Cash Flow 4.1. Working capital increase slower than sales 4.2. Short & declining "Cash Conversion Cycle" 4.3. Free Cash Flow / Sales > 5% Good Valuation 5.1. Price is below Intrinsic Value R-4Q EY% > 6% (or at least more than FD R-4Q DY% > 6% (or at least more than FD Stock Price Breaks out of Consolidation/Dip on an Uptrend 6.1. Stock price breaks out of consolidation/dip 5 2 on an uptrend. 7 - Management and Institutional Investors are Holding/Buying Stock 7.1. Management and Institutional Investors are Holding/Buying Stock 1 2 Overall Score 82%

3 Strategy Stock Grade: BASIS FOR BUYING & SELLING: Fast Grower Technical Indicators Execution: Trend Trading Strategy: Lump Sum + Top Up Averaging Down Method: Conclusion: Wait for retracement to add position.

4 1 - History of Consistently Increasing Earnings, Sales & Cash Flow 1.1. Sales Revenue & Net Income After Tax increasing in the past 5 years. 4,, 3,5, 3,, 2,5, 2,, 1,5, 1,, 5, Total Revenue Net Income 1.2. Net Cash from Operations increasing in the past 5 years EPS increasing in the past 5 years Even if EPS growth is not trendy, but it is acceptable if 3-Y or 5-Y EPS growth rate is more than 15%

5 1.4. Growing/consistent revenue in EPS, revenue and net profit in the last 5 quarters. 1,, 8, 6, 4, 2, Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Turnover Net Profit Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 EPS 1.5. The current quarter's EPS is up more than 15% from the same quarter the year before. EPS Growth: 32.42%

6 2 - Sustainable Competitive Advantage & Strong Future Growth Drivers 2.1. Strong brand, monopoly or barriers to entry 1. Does it have a monopoly situation? No 2. Does it have a strong leading brand? Strong 3. Does it have a high barriers to entry? Very High 4. Does it have market leadership? Strong 2.2. Gross Profit Margin (> 4%) & Net Profit Margin (> 1%) Gross Profit: Profit After Tax: 1,787, Sales Revenue: 3,524,952 1,439,251 Minority Interest: 49,415 Gross Profit Margin: 51% Net Profit Margin: 42% 2.3. Consistently high ROE > 15% Able to deliver double-digit growth in next 3-5 years LT Growth Rate: 5.1

7 2.5. ROIC > 15% 4.% 35.% 3.% 25.% 2.% 15.% 1.% 5.%.%

8 3 - Conservative Debt 3.1. Long term debt < 4 times Net Profit Long Term Debt: 177,7 Long Term Debt < 4 times Current Net Earnings (After Tax): Debt/Equity Ratio < 1 Debt/Equity Ratio: Current Ratio > 1 Current Ratio (MRQ): 7.74

9 4 - Healthy Cash Flow 4.1. Working capital increase slower than sales 2% 1% % -1% % -3% -4% -5% Revenue Growth YOY Working Capital Growth YOY 4.2. Short & declining "Cash Conversion Cycle" Cash Conversion Cycle Free Cash Flow / Sales > 5% Free Cash Flow/Sales: %

10 5 - Good Valuation 5.1. Price is below Intrinsic Value Valuation Method Discounted Cash Flow Growth Rate Remark 5Y Y Cash flow growth is not consistent. 6.91/3 6.91/2 Dividend Discounted Dividend basically has no significant growth PE Sector Avg. PE PE Model PEG Price-to-book Ratio [Share Price]/[P/B] 4.28 Estimated IV: From 11.8 To 13 Discount from IV: From -14.2% To -3.7% 5.2. R-4Q EY% > 6% (or at least more than FD rate) R-4Q EY%: R-4Q DY% > 6% (or at least more than FD rate) R-4Q DY%: 1.3

11 6 - Stock Price Breaks out of Consolidation/Dip on an Uptrend 6.1. Stock price breaks out of consolidation/dip on an uptrend.