Kuala lumpur: RHB Investment Bank Bhd (RHB IB) has initiated coverage on Gas Malaysia Bhd (GMB) with a 'buy' recommendation and a target price (TP) of RM6.50 on expectations of higher gas prices and growth prospects from its planned Regasification Terminal 4 (RGT4) project.

According to BERNAMA News Agency, the investment bank stated that GMB stands to benefit from higher Malaysia Reference Prices (MRP), which track Brent crude oil prices. Following the oil price spike in the second quarter due to the West Asia conflict, RHB expects the MRP to increase 26 per cent year-on-year in the fourth quarter, given the nine-month lag to Brent oil price movement.

The report further elaborated that a stronger impact is anticipated in 2027, with a forecasted MRP increase of 28 per cent year-on-year, reflecting the 21 per cent increase in Brent oil price in 2026. RHB IB emphasized that the company's planned RGT4 project in Yan, Kedah is crucial to ensure a stable gas supply to new gas plants coming online in 2030. The bank has incorporated a 49 sen-per-share contribution from the proposed project into its valuation of GMB.

As the sole operator of the Natural Gas Distribution System (NGDS) network, GMB has received a 20 per cent tariff for Regulatory Period 3 (2026-2028), which is expected to provide a stable earnings base for its regulated business. Additionally, there is potential for a further 10 per cent upside to GMB's share target price if additional regasification capacity from RGT4 is allocated to GMB's gas shipping division.

RHB IB forecasts GMB's earnings to grow four per cent in financial year 2026 before accelerating to 16 per cent in 2027 on higher MRP and stronger gas demand, translating into a compounded annual earnings growth of six per cent over 2025 to 2028. However, the bank noted that downside risks to its recommendation include lower-than-expected MRP, competition among gas shippers, and delays in commissioning RGT4.