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[KUALA LUMPUR] Shares of Petronas Gas, a subsidiary of Petroliam Nasional (Petronas), traded lower for most of Wednesday’s (Apr 2) market session due to a major gas pipeline fire that disrupted operations. However, the shares ended the day unchanged and analysts predict a limited financial impact.

The early morning gas pipeline rupture on Tuesday in Putra Heights, around 36 km from capital Kuala Lumpur, triggered a massive fire that sent flames soaring 500 m into the sky.

The fire was extinguished around 4 pm, but not before it damaged 235 premises and nearly 400 vehicles, displacing over 500 people and injuring more than 100, Subang Jaya police chief Wan Azlan said. No fatalities were reported.

The affected gas pipeline is part of Petronas Gas’ Peninsular Gas Utilisation network, a critical infrastructure for gas transmission across Peninsular Malaysia.

Analysts expect short-term volatility for the company’s stock, though the broader financial and operational impacts are likely to be cushioned by public liability insurance and supply rerouting.

Following the incident, shares of Petronas Gas opened 1 per cent lower at RM16.70 when the counter resumed trading at 10 am on Wednesday. It recovered slightly to RM16.76 by midday, valuing the company at RM33 billion (S$10 billion).

Despite an intraday drop of 38 sen – or more than 2 per cent – Petronas Gas concluded the trading day unchanged at RM16.88.

“The share price decline (earlier on Wednesday was) smaller than expected, but a long-term valuation de-rating is justified to account for operational risks,” said Neoh Jia Man, portfolio manager at Tradeview Capital.

While the incident is unlikely to have a significant impact on Petronas Gas’ earnings due to the company’s large base and mitigation measures, it underscores the inherent operational risks, he added.

Potential RM18 million impact

MIDF Research predicts Petronas Gas will incur a one-off impairment of RM18 million to RM25 million, covering revenue loss for the affected pipeline (10 to 15 per cent), repair costs (25 to 30 per cent), public compensation (25 to 35 per cent), and reputational management.

The research firm also projects at least RM5 million in additional costs over the next two to three months, to compensate industrial customers affected by the pipeline repair.

Meanwhile, Malaysian Prime Minister Anwar Ibrahim announced immediate financial aid of RM2,500 to RM5,000 for homeowners whose residences were destroyed in the fire. He also gave assurance that Petronas and the relevant authorities will undertake the restoration of the affected residential areas.

Nonetheless, the incident is expected to impact Petronas Gas’ total earnings by 1 to 1.5 per cent. For FY2024, the company reported a net profit of RM1.8 billion and revenue of RM6.5 billion.

In a statement on Tuesday, Petronas Gas said it was still assessing the financial and operational impacts of the fire, and will provide further updates.

MIDF Research expects the company’s share price to decline by 1.8 to 2.1 per cent in the short term, but does not foresee a sustained downward trend.

Impact on Gas Malaysia

Gas Malaysia, which operates gas distribution facilities, was also affected by the incident. The company issued a statement on Tuesday noting temporary closures at some gas facilities, potentially disrupting supply in some areas, including parts of the Klang Valley.

The company is still assessing the impact and is in contact with affected parties.

Its shares opened nearly 1 per cent lower at RM4.27 on Wednesday, but pared losses to RM4.33 by midday. The counter ended 5 sen higher at RM4.36.

MIDF Research maintained “buy” calls on both Petronas Gas and Gas Malaysia, with target prices of RM18.67 and RM4.57, respectively.