Hot Stock PetChem falls as much as 1.4% on weaker 3Q earnings

by **Cals** Fri 08 Nov 2013, 13:41

Hot Stock PetChem falls as much as 1.4% on weaker 3Q earnings

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 08 November 2013 11:09

KUALA LUMPUR (Nov 8): Petronas Chemicals Group Bhd saw its share price fall as much as 1.4% after it reported weaker 3Q13 core earnings.

Its third quarter results were below street expectations.

The lower earnings reflected the lower operating efficiency of its product portfolio compared to its closest peer, Thai firm PTT Global Chemical Public Co. Ltd, according to CIMB Investment Bank Research.

At 10.27 am today, PetChem fell 7 sen or 0.9% to RM7.03 on trades of some 771,000 shares. It was among the top losers.

In a note, CIMB IB said it expects the integrated chemicals producer’s 4Q13 earnings to rebound but FY14 earnings growth would be limited due to the weaker margin outlook.

“We maintain our ‘neutral’ call on PetChem and FY13-15 earnings per share forecasts but raise target price (TP) to RM7.70,” said CIMB IB research analyst Suwat Sinsadok.

“TP is based on 8 times CY15 EV/EBITDA (the regional peer average) as we roll over to FY14.”

Suwat said PetChem’s 3Q13 core net profit was 2% below his forecast but 14% below consensus.

As for 9M13 core net profit, it was broadly in line with his estimate at 71% of full-year forecast, as stronger 4Q13 earnings post-shutdown is expected.

“We expect 4Q13 earnings to rebound on the back of higher olefin volumes post-shutdown and higher olefin margins from the rising industry demand,” he said.

“Fertiliser revenue should recover quarter-on-quarter in 4Q13 due to the stronger seasonal demand for urea.”

Meanwhile, M&A Securities Research pointed out that no dividend was declared in the reviewed quarter.

The research house reiterated its ‘hold’ call on PetChem with unchanged fair value of RM7.20.

“In 4Q13, we foresee a favourable financial performance from the group as demand for its products is expected to recover in line with the global GDP forecast of 3%-4%,” said the M&A.