Bursa Malaysia Stock Price Target: PCHEM

RHB Research cut its call on Malaysia's Petronas Chemicals Group Bhd to "market perform" on the shaky outlook for the company's products amid current global economic uncertainties.

"There is downside risk in the 2Q and possibly 3Q FY12 as demand and product prices will likely be influenced by the continued uncertainty in the Eurozone and the economic slowdown in China," RHB said in a research note on Wednesday.

RHB cut earnings per share forecasts for Petronas Chemicals for the financial years 2012, 2013 and 2014 by 1.5 percent, 3.5 percent and 5.4 percent respectively due to the uncertain outlook for the olefins and derivatives (OandD), and fertilisers and methanol (FandM) segments.

"Earnings will remain volatile in the medium term, with potential for more downside - influenced largely by softening oil prices and weakening fundamental demand for petrochemical products," RHB added.

Petronas released its 1QFY12 results on Monday, showing a 7.7 percent drop in net profit to RM1.121 billion due to higher tax expenses.

RHB lowered its fair value estimate for the stock to RM6.84 per share from RM7.44 per share. -- Reuters

March 15, 2012

PCHEM - No sign of strong recovery

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: HWANGDBS

Price Call: SELL

Target Price: 5.90

Petronas Chemicals; Fully Valued; RM6.78
Price Target: RM5.90; PCHEM MK
Weak economic recovery may undermine demand. Raised FY12/13 earnings by 7%/18% on higher utilisation and selling prices. Maintain Fully Valued with revised RM5.90 TP.

Petronas Chemicals: Maintain Buy - On a high

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: MAYBANK

Price Call: BUY

Target Price: 7.50

Feb was fabulous. PCHEM's product margin in Feb 2012 was USD1,116/tonne (-0.6% YoY, +8.1% MoM), we estimate. Product prices are on a steady upward trend thanks to healthy manufacturing numbers, active restocking exercise, heavy buying ahead of a large number of factory maintenance shutdowns in March and also higher naphtha cost. Maintain BUY on PCHEM with an unchanged target price of RM7.50 based on 12x 2013 PER - industry historical mean PER.

Maybank Research 15 March 2012

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March 8, 2012

Petronas Chemicals - MARKET PERFORM - 7 Mar 2012

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: KENANGA

Price Call: BUY

Target Price: 7.02

Petronashas teamed up with BASF to invest an additional RM4.0b in two separatefacilities in Malaysia. This however has no immediate earnings impact to PCHEMgiven that the execution of the investment would be in 2015-2018. We believe PCHEM will take charge of RAPID,although Petronas did not specific any details, given the business nature ofthe facility. Our PCHEM rating is maintained at MARKET PERFORM with anunchanged TP of RM7.02/share.

RM4.0b investment. Yesterday, Petronas announced its has enteredinto agreements with BASF to expand their partnership in Malaysia involving RM4.0bworth of projects at their existing venture in Kuantan and at the new site of the proposed Refinery andPetrochemical Integrated Development (RAPID) complex in Pengerang, Johor. Theseprojects are to be implemented between 2015 and 2018.

Forming a 40:60 JV for RAPID. Under the Heads of Agreements, both parties have agreed to form a newentity (Petronas 40%; BASF 60%) to jointlyown, develop, construct and operate production facilities for specialtychemicals and plants for precursor materials. This will become an integral partof the RAPID project. Although Petronas did not specifically mention thatPetronas Chemicals Group Bhd (PCHEM) will be taking charge of this project, webelieve that it is likely that thisproject will be placed under PCHEM given the business nature of thefacilities.

To expand the current plant in Kuantan. PCHEM's 40% owned BASF Petronas Chemicals Sdn Bhd (BASF owns theremaining 60%) is planning to expand its C3 value chain with a new plant forsuperabsorbent polymers as well as to expand the production capacity of itsexisting glacial acrylic acid unit. Currently, this associate company operatesan integrated complex with acrylic monomers, oxo products and butanediolproduction facilities at the Gebeng Industrial Zone. In the recent quarterlyresults, this unit reported disappointed earnings due to lacklustre demandand lower prices. As a result, PCHEM's4Q11 associate income plunged 48% QoQ to RM54m from RM104m.

No immediate earnings impact. The two projects above will not have any near term material impact onPCHEM's earnings as the projects will only be implemented 3-5 years from now.Besides, its RM4.5b Sabah Ammonia Urea (SAMUR) project, which had itsgroundbreaking last month, is expected to come on-stream only by 2015. Hence,the immediate earning drivers will only be petrochemicals prices and itsplants' utilisation. Give the strong petrochemicals prices YTD, 1Q12 is likelyto be a strong quarter for PCHEM.

Still a MARKET PERFORM. We have recently downgraded ourrating on PCHEM given the strong rally in its share price (refer to ourreported dated 28 Feb 2012) although we continue to like the company for itsearnings quality, which is backed by its cost advantage. For now, we continueto rate the stock a MARKET PERFORM at an unchanged target price of RM7.02/sharebased on an unchanged 16.5x PER of CY12 earnings.

Source: Kenanga

March 7, 2012

PCHEM - Progress on JV with BASF

Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD

Research House: HWANGDBS

Price Call: SELL

Target Price: 5.50

Petronas Chemicals; Fully Valued; RM6.92
Price Target: RM5.50; PCHEM MK

The media reported that Petronas has entered into a heads of agreement with BASF for the development of the Refinery & Petrochemical Integrated Development (RAPID) complex in Pengerang, Johor. Under the agreement, Petronas will hold a 40% stake in the JV while BASF will hold the remaining 60%.

The JV will be developing production facilities for specialty chemical products including isononanol, highly reactive polyisobutylene, non-ionic surfactants, methanesulfonic acid, and plants for precursor material which is part of the MoU signed between the parties in Dec10 for a potential joint investment of RM4bn in Pengerang and their existing facility in Gebeng, Pahang.

In addition, Petronas Chemicals and BASF will expand their C3 value chain with a new plant for superabsorbent polymers, as well as to expand the production capacity of their existing glacial acrylic acid unit in Gebeng, pursuant to their feasibility study (initially to be concluded by end-11).

While the RAPID project is signed by Petronas, we believe that Petronas Chemicals, being the downstream subsidiary of Petronas is likely to be the owner and operator of the massive project when more details are finalized at the later stage of the feasibility study for the RAPID project which is expected to be concluded by end-12. The RAPID project is expected to be commissioned by 2016.

There is no change to our forecast. We reiterate our Fully Valued call with RM5.50 TP, based on 13x FY12 EPS. We remain cautious of PCG's near-term earnings outlook given the potentially weaker demand for petrochemicals and softer product prices. Also, there will not be any capacity growth for Petronas Chemicals at least for the next 3 years.

Source: HwangDBS Research 7 March 2012