LAST_UPDATETue, 17 Jul 2018 5pm

Many Have Underestimated Petronas Chemicals: Maybank IB

KUALA LUMPUR: Petronas Chemicals Bhd’s (PCB) higher net profit of 45 per cent year-on-year was within expectation but way above consensus, says Maybank Investment Bank (Maybank IB).

“Things have been great in the first half 2017, but will be more challenging in the second half due to a number of turnaround activities that will sap production volume and product prices are likely to move sideways.

“There is no change to our earnings forecasts. We maintain a “buy” with an unchanged target price of RM8.10, based on 8.5 times the 2017 EV/EBITDA —on par with its global peers,” the firm said.

PCHEM announced a first interim dividend of 12 sen per share, which is a 71 per cent growth year-on-year and represents a 43 per cent payout of its first half’s net profit.

“On the flip side, mono-ethylene glycol price is rising and other chemical prices such as ethylene, polymers, aromatics and methanol are fairly stable. On balance, we think petrochemical prices will range bound throughout the remainder of the year given global supply-demand is well balanced and crude oil prices are also moving in a tight band.

“Our earnings forecasts have also imputed lower factory utilisation of 87% in 2H17 vs. 1H17’s 94%, leading to lower 2H17 earnings forecasts HoH.

“The overall factory utilisation rate in the second quarter 2017 was 89 per cent, 6ppt lower year-on-year and 10ppt lower quarter-on-quarter,” it added.

The lower utilisation rate was due to the 42 day closure from 1 April to 12 May of the MTBE plant for a scheduled turnaround activity.