STOCK FOCUS OF THE DAY
Petronas Chemicals : Mildly positive on Pengerang risk diversification BUY
We maintain our BUY recommendation on Petronas Chemicals Group (PChem) with an unchanged fair value of RM8.35/share based on a FY18F EV/EBITDA of 8x, on par with its 3-year average. While PChem’s FY17F-FY18F earnings are maintained, we have lowered FY19F earnings by 4% as the potential returns from the commencement of the Pengerang petrochemical operation at the Refinery and Petrochemical Integrated Development (RAPID) will be cut by half.
PChem announced that it has entered into a share purchase agreement to dispose of half of its equity interest and shareholder loans in PRPC Polymers (PP) to Saudi Aramco’s wholly-owned Aramco Overseas Holdings Cooperatief U.A. for US$0.9bil (RM3.8bil) cash. We are mildly positive on this development as PChem will be diversifying its risk profile with a lower equity stake in PP and the over US$1bil capex still to be spend on this project while securing feedstock supplies as Saudi Aramco will be selling 70% of PP’s crude needs. PChem could also leverage Saudi Aramco’s expertise in integrated petrochemical projects, which also opens up future strategic joint-ventures.
The stock now trades at an attractive FY18F EV/EBITDA of 7x, below its 3-year average of 8x, while dividend yields are attractive at 4%.
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ECONOMIC HIGHLIGHT
Thailand : Subdued inflation, strong baht
NEWS HIGHLIGHTS
Budget 2018 : No tax hikes expected for Budget 2018
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The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.
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