Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Petronas Chemicals Group Bhd
(June 22, RM7.07)
Maintain buy at RM7.08 with target price of RM8.15: Petronas Chemicals (PetChem) product margin in May 2011 was US$1,222 (RM3,690) per tonne (+42.1% year-on-year, -1.7% month-on-month), we estimate. The year-to-date product margin of US$1,157 per tonne is 25.8% higher y-o-y. Product prices are retracing from a super run over the past three months.
This is largely expected and we are unperturbed as our 2011 earnings forecast is based on a realistic US$1,027 per tonne. We maintain 'buy' with an unchanged target price of RM8.15.
Product prices are retracing in line with our prediction back in May (refer to our report dated May 4: April high to take a breather). We attribute this largely to a curb in demand brought on by the combination of chemical prices achieving a multi-year high and some, actual plus announced, increasing Middle Eastern supplies.
The April/June quarter could be PetChem's strongest yet, but there is a speed bump in the form of a scheduled maintenance shutdown and a major nationwide gas pipeline overhaul. Gas supply volume will inevitably reduce, which will impact PetChem's utilisation rates and product volumes. We will gather inputs from management and ascertain the impact.
Naphtha prices have come off their highs in line with the retracement of crude oil prices. The price of natural gas has largely remained at low levels and there is little cost pressure. Overall, May has remained good for PetChem as it enjoyed good product prices and still manageable feedstock costs. ' Maybank IB Research, June 22
This article appeared in The Edge Financial Daily, June 23, 2011.
Company Name: PETRONAS CHEMICALS GROUP BHD
| Research House: MAYBANK | Price Call: BUY | Target Price: 8.15 |
Petronas Chemicals Group Bhd
(June 22, RM7.07)
Maintain buy at RM7.08 with target price of RM8.15: Petronas Chemicals (PetChem) product margin in May 2011 was US$1,222 (RM3,690) per tonne (+42.1% year-on-year, -1.7% month-on-month), we estimate. The year-to-date product margin of US$1,157 per tonne is 25.8% higher y-o-y. Product prices are retracing from a super run over the past three months.
This is largely expected and we are unperturbed as our 2011 earnings forecast is based on a realistic US$1,027 per tonne. We maintain 'buy' with an unchanged target price of RM8.15.
Product prices are retracing in line with our prediction back in May (refer to our report dated May 4: April high to take a breather). We attribute this largely to a curb in demand brought on by the combination of chemical prices achieving a multi-year high and some, actual plus announced, increasing Middle Eastern supplies.
The April/June quarter could be PetChem's strongest yet, but there is a speed bump in the form of a scheduled maintenance shutdown and a major nationwide gas pipeline overhaul. Gas supply volume will inevitably reduce, which will impact PetChem's utilisation rates and product volumes. We will gather inputs from management and ascertain the impact.
Naphtha prices have come off their highs in line with the retracement of crude oil prices. The price of natural gas has largely remained at low levels and there is little cost pressure. Overall, May has remained good for PetChem as it enjoyed good product prices and still manageable feedstock costs. ' Maybank IB Research, June 22
This article appeared in The Edge Financial Daily, June 23, 2011.
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