Company Update � PChem (ADD, maintain)
- A good blend of earnings growth and dividend yield
PChem is now conducting technical and financial
feasibility studies on several prospects under Petronas�s US$16bn RAPID project. Management will likely make its
final investment decision by end-2014 or 2015. Meanwhile, PChem�s US$1.5bn SAMUR project and US$500m Kuantan Aroma
Chemical Project are well underway, both targeted to be completed in 2016.
Notwithstanding the high future capex requirement, management has committed
to payout around 50% of net profit, translating into a net dividend yield of
3-3.5% per annum. In the medium term, we expect PChem�s key product prices (except methanol) to remain stable
for 2H14. PChem is now carrying out several turnaround and maintenance
activities at its plants. Upon completion in 3Q14, we expect the group to
operate at higher utilisation in 2015-16. We revised our 2014-16E EPS
forecast by -3% to +1%. Maintain ADD with a higher TP of RM7.45 (from RM7.40)
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