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Sector: Energy
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Fundamental View
AS OF 27 Jun 2025KORGAS is Korea’s sole integrated gas utility company and a quasi-sovereign credit, maintaining an effective monopoly over E&P, procurement, storage and production, transmission, and wholesale distribution of natural gas.
Its credit profile is supported by its dominant position in the natural gas and hydrogen utility market, as well as strong government support, which partially offsets the credit impact of delayed and incomplete pass-through of gas procurement costs during periods of natural gas price surges, such as in FY22.
We expect its credit profile to improve in FY25, aided by stabilizing oil and LNG prices, improved tariff adjustments, and ongoing government backing, which should partially mitigate concerns related to its larger planned capex.
Business Description
AS OF 27 Jun 2025- KORGAS is 54.6% owned directly/indirectly by the Korean government (Central Government 26.2%, KEPCO 20.5%, Local Government 7.9%). It is Korea's only fully integrated gas utility, holding an effective monopoly over E&P, procurement, storage, transmission, and wholesale distribution of natural gas. KORGAS plays a key role in Korea’s energy transition, with plans to increase LNG generation capacity by 56% by 2036 from 2022. KORGAS was also designated as Korea’s sole hydrogen distribution agency in 2020.
- The Korean natural gas sector is split into wholesale and retail segments. KORGAS is the exclusive wholesaler, while city gas companies manage retail supply via regional networks. In FY24, 46% of KORGAS's gas sales were to domestic LNG-fired power generation companies (gencos, including KEPCO subsidiaries and IPPs), with the remaining 54% sold to city gas and heating companies.
- KORGAS's operations are heavily regulated, with government oversight on tariffs, investments, and expansion. Besides domestic LNG, KORGAS owns overseas E&P assets to enhance energy security. In line with government policy, KORGAS is investing in hydrogen infrastructure and renewables, using its gas network and expertise to support Korea’s clean energy transition.
Risk & Catalysts
AS OF 27 Jun 2025Risks: (1) delayed tariff adjustments; (2) larger-than-expected debt-funded capex; (3) domestic regulatory and policy risks; (4) overseas E&P volatility, including political, operational and market risks; (5) depreciation of the KRW against the USD; (6) liquidity shortfalls; (7) asset impairment risks due to decline in global oil and gas prices.
Catalysts: (1) stronger-than-expected government support; (2) tariff increases; (3) stabilizing fuel prices; (4) hydrogen and green energy initiatives; (5) regulated city gas operations with a formula-based cost pass-through system.
Key Metric
AS OF 27 Jun 2025| KRW bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 75.7% | 75.8% | 81.3% | 80.7% | 79.0% |
| Net Debt to Book Cap | 74.6% | 74.2% | 79.8% | 79.1% | 77.2% |
| Debt/Equity | 312.4% | 313.3% | 434.4% | 418.0% | 377.0% |
| Gross Leverage | 9.4x | 9.1x | 9.9x | 11.6x | 8.0x |
| Net Leverage | 9.3x | 8.9x | 9.7x | 11.4x | 7.8x |
| Interest Coverage | 3.4x | 4.8x | 5.1x | 2.2x | 3.4x |
| EBITDA Margin | 12.3% | 11.4% | 8.8% | 8.0% | 13.3% |
CreditSight View Comment
AS OF 27 Jun 2025We maintain our O/P recommendation on KORGAS. Its credit profile is supported by its essential policy role as South Korea’s only vertically integrated natural gas utility and a key energy supplier, which results in strong government backing, a dominant market position, and excellent funding access—offsetting its high leverage. We anticipate its credit profile will strengthen in FY25, driven by stable oil and LNG prices, improved tariff adjustments, and continued government support, which should help address concerns over higher planned capex. We find KORGAS attractive relative to lower-rated Chinese SOEs, BBB-rated low beta Korean corporates, and other Korean quasi-sovereigns. We recommend KORGAS to investors seeking ~5% safe carry in the Asia credit space.
Recommendation Reviewed: June 27, 2025
Recommendation Changed: June 27, 2023
Who We Recommend
Macquarie Bank
Siam Commercial Bank
Pertamina
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Search topics about wealth insights and investments.Pertamina
- Sector: Energy
- Sub Sector: Oil and Gas
- Region: Indonesia
- Bond: PERTIJ 3.1 30
- Indicative Yield-to-Maturity (YTM): 5.339%
- Credit Rating : -/BBB/-
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Fundamental View
AS OF 18 Jun 2025Pertamina enjoys very strong linkages with the Government of Indonesia (GoI) and is assured of extraordinary support in times of distress.
Lower expected Brent crude prices YoY could weigh on its upstream margins and overall EBITDA (given the upstream business accounts for >65% of consolidated EBITDA).
Although leverage typically remains low, Pertamina incurs large capex spending that could pressure its free cash flow generation.
High persisting dividend outflows could restrain free cash flow improvements.
Business Description
AS OF 18 Jun 2025- Pertamina is involved in a broad range of upstream and downstream oil, gas, geothermal and petrochemical operations.
- In the upstream sector, it engages in the exploration, development and production and supply of crude oil, natural gas and geothermal energy.
- As for the downstream sector, the company carries out refining, marketing and distribution of oil, gas, fuel products and petrochemical and other non-fuel products.
- As of 31 December 2024, its total proved oil reserves stood at ~1,394 mmbbl (mn barrels of oil) and gas reserves stood at ~1,058 mmboe (mn barrels of oil equivalent). Its average daily oil and gas production was ~1,045,000 boe per day in FY24. The company owns and operates 6 refineries in Indonesia.
- Under the Public Service Obligation (PSO) mandate, Pertamina is responsible for providing certain grades of motor gasoline, automotive diesel oil, kerosene and LPG at subsidized prices. The subsidized retail price is often times lower than the cost of production, creating a shortfall, for which it receives reimbursements from the GoI.
Risk & Catalysts
AS OF 18 Jun 2025Pertamina’s profitability is materially affected by volatility in oil & gas prices. Prolonged periods of low oil prices could hurt upstream earnings that form the bulk of overall EBITDA (>65%).
As retail prices of certain fuel products are regulated, realized prices may be below its cost of sales.
Pertamina has to initially absorb the shortfall between the regulated retail price and the cost of producing and distributing certain fuel products. If the price of crude oil exceeds the price ceiling set by the GoI, the company may receive insufficient subsidy reimbursements.
Capex typically remains elevated and which pressurizes its free cash flow generation.
Key Metric
AS OF 18 Jun 2025| $ mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 38.5% | 41.2% | 42.1% | 37.6% | 34.9% |
| Net Debt to Book Cap | 18.9% | 21.9% | 12.5% | 8.5% | 12.3% |
| Debt/Total Equity | 62.5% | 70.0% | 72.7% | 60.4% | 53.6% |
| Debt/Total Assets | 28.3% | 29.9% | 30.8% | 27.4% | 26.3% |
| Gross Leverage | 2.4x | 2.5x | 1.9x | 1.9x | 2.2x |
| Net Leverage | 1.2x | 1.3x | 0.6x | 0.4x | 0.8x |
| Interest Coverage | 7.8x | 8.7x | 11.2x | 8.9x | 7.5x |
| EBITDA Margin | 19.9% | 16.0% | 16.7% | 17.7% | 14.3% |
CreditSight View Comment
AS OF 18 Jun 2025We maintain our Market perform recommendation on Pertamina at the issuer level and remove our preference for Pertamina’s 2041-2048 as our preference has played out, with the bonds tightening 19-24 bp since we expressed our preference for these bonds. We think current spread levels are fair given the downside risk of the O&G sector’s cyclicality and persisting policy uncertainty from Indonesia’s new sovereign wealth fund Danantara. That said, we continue to view Pertamina as a safe-haven pick and remain comfortable with Pertamina’s full state-ownership, timely fuel subsidy and compensation from the Indonesian government, positive free cash flow generation, robust credit metrics and our expectation for Pertamina’s strategic policy role to sustain even amidst macro headwinds and Danantara.
Recommendation Reviewed: June 18, 2025
Recommendation Changed: May 16, 2023
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 05 Jun 2025We expect the credit profile of Sinopec, which is one of the three Chinese national oil companies (NOCs) to continue to be underpinned by its strategic role in China’s energy security and the resulting strong government support.
We expect Sinopec’s standalone credit profile to remain supported in FY24 by resilient refined oil demand and improving demand for chemical products as industrial activities pick up and the destocking trend ends.
To note, we use the financials of HKEx listed Sinopec Corp (386.HK) as a proxy for the credit profile of its parent, the obligor of the outstanding $ bonds (BBG: SINOPE).
Business Description
AS OF 05 Jun 2025- Sinopec Group is a Chinese integrated oil and gas (O&G) company and is one of the largest globally & domestically. In 3Q24, 56.4% of Sinopec Corp' external revenues came from marketing and distribution (i.e. retail and direct sales of refined oil), 13.9% from chemicals, 5.1% from refining, and 5.0% from E&P. Corporate and others segment accounted for the remaining 19.6% of sales revenue, consisting of import and export business, R&D and managerial activities.
- The refining segment purchases crude oil from third parties as well as the E&P segment of the company, and processes crude oil into refined petroleum product. Most of the gasoline, diesel and kerosene are sold internally to the marketing and distribution segment of the company; part of the chemical feedstock is sold internally to the chemical segment, and the other refined petroleum products are sold externally to both domestic and overseas customers. The marketing and distribution segment purchases refined oil products from the refining segment and third parties, and mainly distributes to domestic customers via its wholesale and retail networks.
- In 9M24, Sinopec's total oil and gas output was 386.06 mn barrels of oil equivalent, up 2.6% YoY; this included 190.42/20.87 mmbbls (+1.2%/-6.6%) of domestically produced/overseas crude oil, as well as 1,084 bcf of natural gas (+5.6% YoY). The average realized price of its crude oil and natural gas was $76.6/bbl (+1.1% YoY)and $7.48/thousand cubit feet (+5.4% YoY)respectively.
Risk & Catalysts
AS OF 05 Jun 2025Risks: Lower-than-expected domestic sales of refined oil and chemical products due to a severe economic downturn, higher-than-expected crude oil and gas feedstock costs resulted from geopolitical tensions, elevated inventory losses due to tumbling oil & gas prices, and large capex overrun result in a weaker standalone credit profile. However, we expect the strong government support to offset these downside risks. US sanction related headline risks due to US-China tension and other geopolitical risks.
Catalysts: inflow into China $ bonds as a result of improving China macro outlook and US-China relationship; stronger-than-expected recovery in chemical product demand.
Key Metric
AS OF 05 Jun 2025| RMB bn | FY20 | FY21 | FY22 | FY23 | 3Q24 |
|---|---|---|---|---|---|
| Total Debt/Capitalization | 25.3% | 25.6% | 27.5% | 31.5% | 33.1% |
| Net Debt/Capitalization | 9.4% | 7.6% | 16.3% | 19.8% | 21.4% |
| Total Debt/Total Equity | 33.8% | 34.5% | 38.0% | 46.1% | 49.4% |
| Total Debt/Total Assets | 17.2% | 16.7% | 18.3% | 21.7% | 22.9% |
| Total Debt/EBITDA | 1.5x | 1.2x | 1.5x | 2.0x | 2.3x |
| Net Debt/EBITDA | 0.6x | 0.4x | 0.9x | 1.3x | 1.5x |
| EBITDA/Gross Interest | 16.8x | 20.1x | 16.1x | 14.5x | 14.2x |
| EBITDA Margin | 9.5% | 9.4% | 7.0% | 6.8% | 5.9% |
CreditSight View Comment
AS OF 05 Jun 2025We affirm our Market perform recommendation on Sinopec. A-rated Chinese state-owned enterprises (SOEs), including Sinopec are trading tight due to a lack of new supply and as investors fly to quality amid macro uncertainties in China. We continue to prefer AA-rated Korean quasi-sovereign names for safe carry (like KOROIL, KORGAS, KEPCO) and higher-beta Chinese SOEs for spread pickup.
Recommendation Reviewed: June 05, 2025
Recommendation Changed: May 03, 2021
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 29 May 2025PLN enjoys extremely strong ties with the Government of Indonesia (GoI) given its critical policy role of electrifying the nation. Post the launch of Indonesia’s sovereign wealth fund Danantara, PLN is now indirectly owned by the GoI through Danantara.
PLN delivered a robust set of FY24 results, with total revenue and EBITDA up 7% and 18% YoY respectively driven by resilient power demand across Indonesia
Looking ahead, we expect PLN’s credit metrics to improve in FY25 supported by higher YoY EBITDA, though partially weighed upon by higher capex; we anticipate FY25 EBITDA growth to be in the mid to high single-digit % YoY, mainly attributable to Indonesia’s healthy economic growth, supporting power demand; we also expect power tariffs to remain flat.
Business Description
AS OF 29 May 2025- PLN is involved in the entire electricity value-chain, from power generation, to transmission, distribution and retail.
- It alone accounts for 76% (~47 GW) of Indonesia's generation capacity (of which 8 GW is renewable capacity), while IPPs provide the remainder.
- The company controls and operates the entire transmission and distribution network in the country. It is the sole buyer of electricity produced by IPPs, through power purchase agreements (PPAs).
- It sells electricity to well-diversified off-takers – 41% to households, 25% to industrial customers, 21% to businesses and 12% to others.
- Since 2015, the GoI has gradually implemented monthly tariff adjustments for 13 customer groups, so that rates charged to customers are better matched with production costs.
- However, under the Public Service Obligation (PSO), the company will continue to sell electricity at subsidized rates of 50% to 450-volt amperes (VA) power households and 25% to 900 VA power households. The GoI subsequently reimburses the company for the difference between the subsidized tariff rate and production cost, typically within 2-3 months.
Risk & Catalysts
AS OF 29 May 2025The company provides subsidized electricity to certain households for which it subsequently receives reimbursements from the GoI; though these payments tend to get delayed during major events such as COVID-19 pandemic.
In order to increase the country’s electrification ratio to 97%, the company had been mandated by the GoI to develop large electricity capacities through the Fast Track II and 35,000 MW Programs. Implementation of such complex programs has required significant capital expenditure, which has led PLN’s FCF to fall deep into the red in recent years and created a funding gap.
The success of the above programs is also contingent on the company’s ability to source coal cheaply, select quality contractors, acquire land rights and receive adequate subsidy reimbursements from the GoI.
Being primarily a thermal power producer, PLN may be viewed unfavourably from an ESG perspective.
Key Metric
AS OF 29 May 2025| IDR bn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 32.2% | 29.7% | 28.9% | 27.8% | 27.3% |
| Net Debt to Book Cap | 28.2% | 26.9% | 25.2% | 23.7% | 23.0% |
| Debt/Total Equity | 47.4% | 42.2% | 40.7% | 38.5% | 37.5% |
| Debt/Total Assets | 28.1% | 25.7% | 24.6% | 23.4% | 22.5% |
| Gross Leverage | 5.5x | 5.0x | 4.2x | 4.3x | 3.7x |
| Net Leverage | 4.8x | 4.6x | 3.7x | 3.7x | 3.1x |
| Interest Coverage | 2.5x | 3.2x | 4.3x | 3.6x | 3.7x |
| EBITDA Margin | 29.0% | 28.0% | 30.1% | 26.4% | 29.1% |
CreditSight View Comment
AS OF 28 May 2025We have a M/P on PLN and prefer its 2042-2050s. While we think PLN’s shorter-dated is trading slightly tighter than our FV, we do not think the widening potential of its shorter dated is sufficient to warrant an Underperform. Overall, we remain comfortable with PLN’s resilient credit profile supported by healthy domestic power demand, good insulation from input cost volatility and strong state-ownership. While there were concerns of the GoI demonopolizing the power sector, we think PLN’s monopoly is likely to stay after President Prabowo reportedly abandoned plans to allow customers to purchase clean electricity directly from renewable energy developers. That said, we think PLN continue to face higher coal-related ESG risk and elevated capex plans that could weigh on its credit metrics.
Recommendation Reviewed: May 28, 2025
Recommendation Changed: December 06, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 27 May 2025Petron’s FY24 results improved slightly; we expect Petron’s credit metrics to remain flat to improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid a single-digit YoY decline in sales volume growth though partially supported by lower crude oil input costs
About two-third of its total revenues are derived from the Philippines and are indexed to Dubai crude prices, which allows for smooth cost pass-throughs and good insulation from crude price volatility.
Free cash flows are typically negative due to inventory fluctuations that outweigh low capex.
Business Description
AS OF 27 May 2025- Petron is the largest oil refining and retailing company in the Philippines, and the third largest player in Malaysia. It maintains a 24% market share in the Philippines (followed by Shell and Caltex) and a 20% market share in Malaysia (largest being Petronas), based on total fuel sales volumes.
- Petron has a total refining capacity of 268k barrels/day (bpd) and accounts for about 30% of the Philippines' fuel needs. Its petroleum refining facilities include the Limay Refinery in Bataan, Philippines (capacity of 180k bpd; 67% of total) and the Port Dickson Refinery in Negeri Sembilan, Malaysia (capacity of 88k bpd; remaining 33% of total).
- Petron's refineries process crude oil into a full range of petroleum products including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.
- It further markets and retails these fuel products through its fuel service stations located across the Philippines (~1,800 outlets) and Malaysia (>800 outlets).
- Petron sources its crude oil supplies from third-party suppliers, namely Saudi Aramco, Kuwait Petroleum Corporation and Exxon Mobil, which are bought on the basis of term contracts and in the spot market.
- Petron mainly supplies its petroleum and fuel products to customers in Malaysia and the Philippines (~95% of annual revenue).
- Petron is 68% owned by San Miguel Corporation (SMC), one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets. SMC's CEO, Mr. Ramon Ang, is also Petron's CEO.
Risk & Catalysts
AS OF 27 May 2025Petron cannot fully pass on higher crude oil input costs to customers in Malaysia.
Petron operates in low-margin business (EBITDA margins ~5%) and maintains elevated credit metrics.
Petron is highly dependent on its Limay petroleum refining complex that makes up two-thirds of its total refining capacity (67%). Any events that disrupt the refinery’s operations could adversely affect Petron’s total revenues.
Key Metric
AS OF 27 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 74.0% | 75.1% | 74.5% | 74.1% | 73.4% |
| Net Debt to Book Cap | 65.5% | 68.2% | 67.1% | 66.3% | 63.9% |
| Debt/Total Equity | 284.2% | 301.4% | 292.0% | 285.4% | 275.8% |
| Debt/Total Assets | 70.2% | 67.6% | 64.9% | 65.3% | 64.3% |
| Gross Leverage | 10.9x | 7.1x | 7.4x | 6.5x | 7.2x |
| Net Leverage | 9.7x | 6.4x | 6.7x | 5.9x | 6.3x |
| Interest Coverage | 2.2x | 2.2x | 1.9x | 2.2x | 1.9x |
| EBITDA Margin | 3.4% | 5.3% | 4.7% | 5.8% | 6.5% |
CreditSight View Comment
AS OF 27 May 2025We maintain our Market perform recommendation on Petron. Petron’s c.Apr-2026 perp trades rightfully tighter than SMC c.Jul-2025 perp, which we see as fair given its Opco structure vs. SMC’s Holdco, its cost pass-through mechanisms, and low capex which more than offset SMC’s larger diversified businesses. Overall, we continue to take comfort in Petron’s resilient credit profile, supported by a good cost-passthrough contractual mix that provides good insulation from crude price volatility. We expect Petron to incur higher capex YoY, and expect credit metrics to remain flat-to-improve slightly in FY25 owing to higher capex and flattish % YoY EBITDA growth amid lower crude oil input costs, as well as a further ~PHP 15 bn of preference share issuances.
Recommendation Reviewed: May 27, 2025
Recommendation Changed: January 26, 2022
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
How may we help you?
Search topics about wealth insights and investments.SMC Global Power
- Sector: Energy
- Sub Sector: Independent Power Producers
- Country: Philippines
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Fundamental View
AS OF 19 May 2025We see lower non-call risk for SMC GP’s c.2025 and c.2026 perps owing to strong near-term parental funding support, its recent c.2024 perp refinancing, and recent bond exchange/tender with a new $900 mn c.2029 perp issuance.
We see an improving credit outlook for SMC GP aided by lower thermal coal input costs, new contracts, and capacity additions. Net cash inflows of $2.1-$2.2 bn from the completion of an LNG deal is also positive.
While SMC GP improved its cost passthrough contractual mix from end-FY23 onwards, the company still remains exposed to high thermal coal input costs (~40-50% of contracts).
SMC GP incurs sizable capex that has led to additional debt incurrence and elevated credit metrics.
Business Description
AS OF 19 May 2025- SMC GP is a leading power generation and distribution company in the Philippines. As at 31 December 2021, its total generation capacity stood at 4.7 GW, accounting for ~20% of the national grid.
- The bulk of its revenues is derived from power generation (~82%), with the remainder from electricity distribution and retailing (~18%).
- It operates 7 power generating plants across diversified energy sources, comprising coal (~62%), natural gas (~25%), hydro (~12%) and battery energy storage (~1%).
- Through long-term power supply agreements and retail supply contracts, SMC GP either sells electricity directly to customers (including large Philippines power distribution company Manila Electric Company, distribution utilities and other industrial customers), or through the Philippine Wholesale Electricity Spot Market.
- SMC GP acts as the Independent Power Producer Administrator (IPPA) for three power plants (~54% of total capacity), where it has the right to sell electricity generated by the IPPs without having to bear large upfront capital expenditures for plant construction and maintenance.
- SMC GP also distributes and retails electricity services through its wholly-owned subsidiary Albay Power and Energy, which distributes power in the province of Albay, Luzon.
- SMC GP is a wholly-owned unlisted subsidiary of San Miguel Corporation, one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets.
Risk & Catalysts
AS OF 19 May 2025SMC GP still has $307 mn/$1.2 bn of c.2025 and c.2026 perps outstanding to be addressed, though we see low non-call risks.
A moderate portion of SMC GP’s off-take contracts do not contain cost pass-through mechanisms. This exposes the company to a rise in thermal coal input costs that could squeeze its EBITDA margins.
SMC GP incurs sizable capex that has spurred additional debt incurrence. Consequently, its credit metrics remain elevated.
Over 80% of SMC GP’s installed capacity is thermal coal or gas-fired, which may be viewed unfavorably from an ESG perspective.
Key Metric
AS OF 19 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 69.2% | 62.8% | 64.4% | 63.0% | 61.1% |
| Net Debt to Book Cap | 66.4% | 59.4% | 57.7% | 59.1% | 53.2% |
| Debt/Total Equity | 224.6% | 168.7% | 181.2% | 170.0% | 157.4% |
| Debt/Total Assets | 79.0% | 73.8% | 73.8% | 72.7% | 75.3% |
| Gross Leverage | 19.4x | 12.9x | 11.9x | 12.6x | 10.8x |
| Net Leverage | 18.6x | 12.2x | 10.7x | 11.8x | 9.4x |
| Interest Coverage | 1.4x | 2.2x | 2.3x | 2.2x | 2.4x |
| EBITDA Margin | 13.2% | 26.4% | 26.6% | 27.3% | 34.4% |
CreditSight View Comment
AS OF 19 May 2025We have an Outperform recommendation on SMC GP. We think refinancing risk on the c.2025–2026 perps has meaningfully decreased with the completion of its bond exchange and tender offers. We are comfortable with SMC GP’s improving credit outlook, potential for forthcoming parental support, and management’s willingness and ability to repay the perps. The completion of the $3.3 bn LNG deal is also positive. We continue to see low non-call risk for the c.2025 perps, grow more comfortable with the c.2026 perps that could be refi-ed with new $ perps, and see the 8%+ yields on the c.2029 perps as attractive. Key risks we are watchful of include any weakening of parental funding support (due to SMC’s own sizable infra capex) and overly aggresive capex..
Recommendation Reviewed: May 19, 2025
Recommendation Changed: September 09, 2024
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 07 Apr 2025Petronas’ FY24 credit metrics remained resilient even as EBITDA fell as we had expected.
Despite the lower YoY outlook for O&G price realizations in FY25, we expect Petronas’ credit profile to remain resilient in FY25 and maintain its net cash position, aided by resilient domestic demand and still-positive FCFs.
We take comfort in Petronas’ strong support from the Government of Malaysia, given it is strategically vested with Malaysia’s entire oil & gas resources and provides a substantial source of government income.
Sizable O&G and renewable capex and high dividend payouts could restrain improvements in Petronas’ credit metrics and free cash flows.
Business Description
AS OF 07 Apr 2025- Petronas is an integrated oil and gas company, wholly owned and controlled by the Government of Malaysia.
- Its activities span the entire up/mid/downstream value chain both domestically and internationally. Key products and services provided include the sale and marketing of petroleum products, crude oil and condensates, LNG, natural and processed gas, petrochemicals, shipping services, property development and automotive engineering.
- Petronas carries out its exploration, development and production activities via production sharing contracts (“PSCs”), mostly with international O&G companies and Petronas' wholly-owned subsidiaries.
- Its Downstream segment is aimed at refining, supplying, trading, manufacturing and marketing of crude oil, petroleum products, and petrochemical products. Its key projects and factories include Pengerang Integrated Complex (PIC), Sabah Ammonia Urea in Sabah, and Integrated Aroma Ingredients Complex in Gebeng, Kuantan.
- Its Gas and New Energy division was set up in FY19 and groups all of Petronas' LNG, gas and renewable revenues into a single segment. Activities within this division include production of LNG, processing and transportation of gas and solar power production.
- Its 6 listed subsidiaries include MISC Berhad (57.56%), KLCC Property (75.46%), Petronas Chemicals Group Berhad (64.35%), Petronas Gas Berhad (51%), Petronas Dagangan Berhad (63.94%), and Bintulu Port Holdings Berhad (28.52%).
Risk & Catalysts
AS OF 07 Apr 2025Broad growth slowdown concerns could hamper sales of Petronas’ Downstream (petroleum products) and Gas & New Energy (LNG and natural gas) segments.
Prolonged periods of low crude oil prices could harm upstream O&G EBITDA (which typically contributes 50%-70% of total profit after tax), albeit mitigated partly by stronger downstream O&G EBITDA.
Sizable capex on domestic O&G and renewable energy ventures could restrain improvements in Petronas’ credit metrics and free cash flows.
Petronas is regularly required to pay dividends to the Government of Malaysia, which may weigh on its cash flows.
We remain watchful of how the dispute between Petronas and Sarawak state government unfolds, its impact on Petronas’ financials and its market position in the Malaysian O&G sector.
Key Metric
AS OF 07 Apr 2025| MYR mn | FY20 | FY21 | FY22 | FY23 | FY24 |
|---|---|---|---|---|---|
| Debt to Book Cap | 18.8% | 21.1% | 18.4% | 18.2% | 18.0% |
| Net Debt to Book Cap | n/m | n/m | n/m | n/m | n/m |
| Debt/Total Equity | 23.2% | 26.7% | 22.6% | 22.2% | 21.9% |
| Debt/Total Assets | 15.4% | 17.0% | 14.7% | 14.4% | 14.5% |
| Gross Leverage | 1.4x | 1.1x | 0.6x | 0.8x | 0.9x |
| Net Leverage | n/m | n/m | n/m | n/m | n/m |
| Interest Coverage | 15.0x | 20.9x | 33.9x | 24.9x | 21.8x |
| EBITDA Margin | 34.7% | 45.2% | 50.7% | 44.8% | 42.0% |
CreditSight View Comment
AS OF 07 Apr 2025We maintain our M/P rec on Petronas and prefer its existing 2026-2032 and the newly priced 2031. We compare Petronas to Pertamina and think its longer-dateds trade within our fair value range against Pertamina’s longer-dateds. On the other hand, the spread differential between Petronas’ and Pertamina’s shorter-dated have narrowed since Aug-2024, and we see some scope for Petronas’ shorter-dated to tighten. We like Petronas’s larger EBITDA, net cash position, more regular financial reporting than Pertamina and Malaysia’s relative policy stability. With the Petronas vs Sarawak state dispute nearing a resolution, we are more comfortable with the credit though we remain watchful of any negative development should Sarawak further contest the reported agreement.
Recommendation Reviewed: April 07, 2025
Recommendation Changed: September 07, 2020
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank
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Fundamental View
AS OF 01 Jan 1970Business Description
AS OF 01 Jan 1970Risk & Catalysts
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Key Metric
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CreditSight View Comment
AS OF 06 Feb 2025KEPCO is the sole electricity distributor and transmitter in South Korea, undertaking an irreplaceable policy role. Its credit profile is underpinned by excellent government support which allows the company to enjoy strong access to the onshore and offshore funding channels that mitigate its elevated leverage and insufficient cash coverage for short-term debt. KEPCO is in the process of implementing a financial improvement plan and aim to restore its financial soundness by 2027. Its $ bonds provide attractive yield pick-ups compared to lower-rated Chinese SOEs and BBB-rated low beta Korean corporates, in our view. We prefer the new KORELE Feb-28 and KORELE 5.5% Apr-28 for short-dated high-coupon carry and better trading liquidity.
Recommendation Reviewed: February 06, 2025
Recommendation Changed: July 24, 2023
Who We Recommend
Korea Gas Corp.
Macquarie Bank
Siam Commercial Bank