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Monday, June 20, 2011

ESSO (stock code : 3042) Recommended Buy

Buy Price : RM5.25
52 week high : RM5.97
52 week low : RM2.50
Mkt Cap RM : 1.4b
P/E : 3.9x
ROE : 42.3%
Target Price : RM5.97

Esso Malaysia Berhad manufactures and markets petroleum products as well as operates an oil refinery in Port Dickson which has the licensed capacity of 75,000 barrels per day. The company is a subsidiary of Esso Eastern Incorporated, which is wholly owned by Exxon Corporation that is incorporated in the USA. Esso Malaysia Bhd's earnings surged 154% to RM154.82 million in the first quarter ended March 31, 2011 from RM60.94 million a year ago, boosted by inventory holding gains. It reported on Monday, May 16 that revenue rose 30% to RM2.6 billion from RM2 billion reflecting higher average product prices and increased retail volume. Earnings per share were 57.30 sen compared with 22.60 sen. Esso Malaysia said the improvement in current quarter's results was driven mainly by inventory holding gains caused by the significant increase in crude and product prices.

On the prospects, Esso Malaysia said business conditions remain challenging in light of the uncertainty in the crude price environment. “Recognising the potential earnings volatility, the company will continue to focus on sustaining flawless operations, cost control and product and service quality, while sustaining our competitive position,” it said. (Bloomberg News, May 16, 2011)

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