BUSINESS

RHB MAINTAINS 'BUY' CALL FOR PETRONAS CHEMICALS

15/01/2019 01:02 PM

KUALA LUMPUR, Jan 15 (Bernama) -- RHB Research has maintained the “buy” call on its top pick oil and gas counter, Petronas Chemicals Group Bhd (PCG), with a new target price of RM11.23.

It said PCG’s recent share weaknesses, had been largely priced in the expected weaker year-on-year petrochemical prices.

It said petrochemical prices such as high-density polyethylene (HDPE) and linear low-density polyethylene (LLDPE) had weakened from 2018’s year high of US$1,200 – US$1,400 per tonne to US$1,000 per tonne in the last quarter 2018 and recovered slightly to US$1,065 per tonne in January 2019.

As for 2019, HDPE and LLDPE prices are expected to recover to US$1,200 – US$1,250 per tonne in line with the recovery in Brent crude price, forecasted at US$73.5 per barrel. 

It also expects both fertiliser and methanol prices to remain manageable in 2019.

In addition, it said higher overall plant utilisation for this year would also help offset an expected product price decline.

RHB Research said it was confident the group could achieve overall plant utilisation of 94-97 per cent this year compared to an estimated 89-90 per cent in 2018.

For 2019, it expects only one major maintenance in the second quarter and third quarter on Petronas Chemicals (PC) Olefins and PC Fertiliser Sabah (SAMUR), which contributed 5.4 per cent and 15 per cent to total capacity, respectively.

“While significant, 2019 turnaround activities are less severe than 2018, of which four major plant turnarounds are already seen for PC Ethylene (Kertih), PC Polyethylene (Kemaman), PC Fertiliser (Kedah), PC Methanol Plant 2 (Labuan) and Urea (Bintulu) accounting for 42.4 per cent of total capacity,” it said in a note.

In addition, RHB Research said the group also could possibly pay a higher dividend this year following the parent company’s obligation to pay an additional RM30 billion to the government as announced under Budget 2019.

“Under our sensitivity analysis, if dividend payout is increased to 100 per cent, dividend yield could double to 5.6 per cent from the current assumption of 2.8 per cent,” it added.

-- BERNAMA 

 


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