The Three Numbers That Fill Up Petronas Dagangan Berhad

In country with over 20 million cars, Petronas Dagangan Berhad (KLSE: 5681.KL; KLSE: PETDAG) should be in the right place with the right product.

With around 1,000 petrol stations up and down the country, PetDag commands around a third of the forecourt market. It also boasts one of the highest Return on Equity (RoE) on the Kuala Lumpur Stock Exchange. At 14.4% last year, it implies that the petrol station generated MYR14.40 on every 100 ringgit of shareholder equity invested in the business.

PetDag’s Net Income Margin is an astonishingly-low 3.1%. It means that the seller of fuel and lubricants only made MYR3.10 on every MYR100 of sales, which is below the market average.

But what the company loses on the swings it gains on the roundabouts. Its Asset Turnover is a mouth-watering 2.9. In other words, PetDag generated MYR290 on every MYR100 of asset employed in the business.

PetDag does make use of some leverage. It had MYR3.8 billion of Total Liabilities and MYR8.8 billion of Total Assets. That equates to a Leverage Ratio of 1.6.

By uncoupling PetDag’s Return on Equity, it is easy to see how its coffers gets filled up. Its high Return on Equity of 14.5% is the product of a low Net Income Margin of 3.1%; an enviable Asset Turnover of 2.86 and a modicum of Leverage Ratio of 1.6.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.