RHB starts Gas Malaysia at buy with RM6.50 target on oil price upside

MALAYSIA, 24 JULY 2026 —

RHB Research has initiated coverage on Gas Malaysia Bhd with a 'buy' rating and an RM6.50 target price, citing a 25% upside from its RM5.19 share price as rising crude oil boosts gas pricing margins. The research house believes that the current elevated crude oil price environment calls for more bullish calls on Gas Malaysia, as it tends to benefit from higher oil prices. This is a key theme driving RHB's positive stance on the stock.

Following the oil price spike in 2Q from the Middle East conflict, RHB Research forecasts MRP to increase 26% year-on-year in 4Q given the nine-month lag to Brent oil price movement. The research house expects a stronger impact in 2027, and forecasts MRP to increase 28% year-on-year, to reflect the 21% increase in Brent oil price increase in 2026. This increase in MRP is expected to have a positive impact on Gas Malaysia's earnings, as the company's shipper division will benefit from higher gas prices. Further, Gas Malaysia has received approval from the Energy Commission to build a new RGT4 in Yan, Kedah, with targeted commissioning by 2030.

The RGT4 project is crucial to ensure a stable gas supply to new gas plants coming online in 2030. RHB Research believes RGT4 will be a key gas supplier to Malakoff Corp Bhd's upcoming 2.8GW gas plants. Assuming RM2.1 billion capex, 6.9% WACC (weighted average cost of capital) and 70% stake, RHB Research has imputed a 49 sen/share valuation from the project into its SOP. The research house sees potential upside from the allocation of gas capacity to Gas Malaysia’s shipper division, which could result in another 10% upside from its target price. The RGT4 project is a significant development for Gas Malaysia, and its successful completion is expected to drive the company's growth in the coming years.

Meanwhile, Regulatory Period 3 (RP3) tariffs provide stable earnings to Gas Malaysia, currently the sole operator of the natural gas distribution system network. The company had received a 20% tariff for RP3 (2026-2028). RHB Research expects this to provide a stable earnings base for its regulated business, contributing to 40% of group profits, as Gas Malaysia earns a fixed regulated return on an expanding regulated asset base. The firm estimates a 25% increase in regulated capex approval for RP3, which should see its regulated asset base grow to RM2.7 billion by end-2028. This increase in regulated asset base is expected to drive Gas Malaysia's earnings growth in the coming years.

RHB Research forecasts FY2026 earnings to grow 4% year-on-year to reflect higher regulated tariffs — mitigating lower volume and MRP. The house expects FY2027 earnings to rise 16%, in line with higher MRP and volume rebound, before moderating 1% in FY2028 on lower MRP. All in, RHB Research expects net margin to remain stable at 6% and is forecasting 6% earnings compound annual growth rate for FY2025-2028. The firm derives its target price from ascribing 18 times price-to-earnings multiple on FY2027 recurring earnings, and incorporating a RM634 million discounted cash flow value for its upcoming RGT4. These forecasts indicate that Gas Malaysia is expected to deliver stable earnings growth in the coming years, driven by its regulated business and the RGT4 project.

In terms of regional impact, the development of the RGT4 project is expected to have a positive impact on the Malaysian economy, as it will ensure a stable gas supply to new gas plants coming online in 2030. This will drive economic growth and development in the region, particularly in the energy sector. Stakeholders, including investors and industry players, are expected to benefit from the growth of Gas Malaysia and the development of the RGT4 project. However, downside risks to RHB Research's recommendation include lower-than-expected MRP, competition from other shippers impacting volume, and delays in RGT4 commissioning. Details not yet available on the potential impact of these risks on Gas Malaysia's earnings and growth prospects.

Looking ahead, RHB Research's 'buy' call on Gas Malaysia is driven by the company's strong growth prospects, driven by its regulated business and the RGT4 project. The research house expects Gas Malaysia to deliver stable earnings growth in the coming years, driven by its regulated business and the RGT4 project. With a target price of RM6.50, RHB Research believes that Gas Malaysia offers a compelling investment opportunity for investors looking to benefit from the growth of the energy sector in Malaysia. As the company continues to execute its growth strategy, investors can expect to see significant returns on their investment in the coming years. The successful completion of the RGT4 project will be a key driver of Gas Malaysia's growth, and investors will be closely watching the company's progress in this regard. With its strong growth prospects and stable earnings base, Gas Malaysia is well-positioned to deliver long-term value to its investors.

Related: Gas Malaysia · Malaysia