Petronas Stays Conservative

Petronas 2Q'16 net income decreased 96% y.o.y to RM348 million on the back of impairment losses amounting to RM7 billion from its Gladstone LNG Project. Although cost-cutting measures by the group are beginning to yield results on its operating cashflows, this might be counterbalanced by a dividend payout target of RM16b. Kong Ho Meng of UOB Kay Hian expects poor earnings visibility for the 2H'16 as Petronas remains selective on award of new contracts. Bumi Armada is the top pick.