Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: RHB
Oil and Gas sector
Maintain overweight: Petronas' 3QFY11 till March year-to-date (YTD) net profit of RM35 billion (excluding an extraordinary gain of RM9.3 billion) was up 14% year-on-year (y-o-y) on the back of higher revenue from: (i) Higher realised prices of liquefied natural gas (LNG), petroleum products and crude oil; and (ii) Higher sales volume of its petroleum products and petrochemicals. In terms of segmental performance the downstream segment posted the highest YTD y-o-y gains (+32.4%) due to: (i) Improved refining margin; and (ii) Higher margin recorded by the petrochemical business.
During the quarter, the group completed the listings of both Malaysia Marine and Heavy Engineering Bhd and Petronas Chemicals Group. Post-listing, it currently owns 41.6% and 64.3% respectively in the companies. The listings resulted in a net gain of RM9.3 billion.
Overall, we believe the results are satisfactory given that average Malaysian crude prices (3QFY11: US$87.10/bbl [RM264.78]; 2QFY11:US$77.30/bbl and 3QFY10: US$81.6/bbl) had increased by 12.7% on a quarter-on-quarter (q-o-q) basis and 6.7% on a y-o-y basis.
We believe that in an environment of rising crude oil prices, the downstream segment would most likely be the best performer given that Petronas' petrochemicals arm currently has a competitive gas-based structure. We highlight that effective April 2011, the group will change its financial year-end from March to December.
We expect the domestic sector to remain vibrant given that: (i) Petronas has already committed to a capex expenditure of RM40 billion for the year and RM250 billion over the next five years, with heightened focus on the domestic exploration and production; and (ii) The sector is one of the national key economic areas. Key themes to watch out for in the near term are companies taking a stake in upcoming marginal oilfield awards, and increased M&A as companies consolidate to gear up for the upcycle in the sector. Our top picks are PetChem ('outperform', fair value: RM7.27) for the positive outlook on the petrochemicals business and Dialog Group Bhd ('outperform', fair value: RM2.82) for the company's robust fundamentals and conservative management. ' RHB Research, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: RHB
Oil and Gas sector
Maintain overweight: Petronas' 3QFY11 till March year-to-date (YTD) net profit of RM35 billion (excluding an extraordinary gain of RM9.3 billion) was up 14% year-on-year (y-o-y) on the back of higher revenue from: (i) Higher realised prices of liquefied natural gas (LNG), petroleum products and crude oil; and (ii) Higher sales volume of its petroleum products and petrochemicals. In terms of segmental performance the downstream segment posted the highest YTD y-o-y gains (+32.4%) due to: (i) Improved refining margin; and (ii) Higher margin recorded by the petrochemical business.
During the quarter, the group completed the listings of both Malaysia Marine and Heavy Engineering Bhd and Petronas Chemicals Group. Post-listing, it currently owns 41.6% and 64.3% respectively in the companies. The listings resulted in a net gain of RM9.3 billion.
Overall, we believe the results are satisfactory given that average Malaysian crude prices (3QFY11: US$87.10/bbl [RM264.78]; 2QFY11:US$77.30/bbl and 3QFY10: US$81.6/bbl) had increased by 12.7% on a quarter-on-quarter (q-o-q) basis and 6.7% on a y-o-y basis.
We believe that in an environment of rising crude oil prices, the downstream segment would most likely be the best performer given that Petronas' petrochemicals arm currently has a competitive gas-based structure. We highlight that effective April 2011, the group will change its financial year-end from March to December.
We expect the domestic sector to remain vibrant given that: (i) Petronas has already committed to a capex expenditure of RM40 billion for the year and RM250 billion over the next five years, with heightened focus on the domestic exploration and production; and (ii) The sector is one of the national key economic areas. Key themes to watch out for in the near term are companies taking a stake in upcoming marginal oilfield awards, and increased M&A as companies consolidate to gear up for the upcycle in the sector. Our top picks are PetChem ('outperform', fair value: RM7.27) for the positive outlook on the petrochemicals business and Dialog Group Bhd ('outperform', fair value: RM2.82) for the company's robust fundamentals and conservative management. ' RHB Research, March 3
This article appeared in The Edge Financial Daily, March 4, 2011.
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