Gas Malaysia’s Growth Is in the Pipeline

Dateline 2015-06-23, Barron’s:

“Keep it simple, stupid” has been the catch-cry of investment legends like Warren Buffett and Peter Lynch.

These heavyweights of investment lore have opined on the attractiveness of businesses that offer simple, easy to understand business models that provide a clear picture of how revenues and profits are generated. One of Buffett’s rules is that if you can’t understand what a company does after five minutes, then move on.

It appears Gas Malaysia (GASMSIA.MY) has taken that sage advice on board. The distributor of natural gas in peninsula Malaysia has made the job for analysts very simple,with a new regulatory regime for the pricing of natural gas providing share price prognosticators much clearer visibility on the stock’s earnings.

Coming to grips with regulatory regimes for utility stocks can be deathly boring. And Gas Malaysia is no different. However, understanding the company’s plans to adopt a so-called incentive-based regime (IBR) helps explain why there has been a round of earnings upgrades and ratings changes for a stock that has fallen 21% this year compared to a 2% decline in the Kuala Lumpur Composite Index.

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