Lotte Chemical Titan (LCTITAN) - 2018 gem in making

Author: kelvin_ik4u   |   Latest post: Tue, 6 Mar 2018, 5:24 PM


Lotte Chemical Titan (LCTITAN) - why share price can exceed 50% growth & beyond in 2018

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Why LCTITAN share price look positive & able-do reach RM12 for 2018 (assume PE 15 comparable with PCHEM).


Research deeper onto LCTITAN mgmt as what it prospectus stated, it will give 50% dividend payout annually. Assume next Q1'18 and subsequent Q2, Q3 & Q4 sustainable earning profit reach RM400mil ~ RM500mil (which probably do-able due to additional 30% output vol + >90% output efficiency), it forward quartely EPS can hit to 20sen+

These mean it share price can hit RM8.00 (for PE 10) + divident payout of 40sen (50% payout) per annum. That's dividend alone pay us 7.0% per annum (based on current share price RM5.65). That way better than FD saving alone, not including its share price appreciation in coming months for whole 2018.

That why, Lctitan has huge potential assume it go back to its original normalised PE value. If market give PE 15, samea as Petronas Chemical (PCHEM), then its share price value can hit RM12.


My research consensus:


With the new expansion plant of TE3 (commence on 16th Dec 2017), this will improve additional 30% output for Q1'18, impact to it revenue & earning profit will be significant assume all factors remain same as last Qtr Q4'17.

TE3 plant will increase production capacities of ethylene and propylene are expected to increase by 93,000 tonnes & 170,000 tonnes per annum.


FinanciaL Capital & Expansion Path:


As at Dec 2017, LCTITAN has an incrediable strong balance sheet, with MYR 3.62bil in cash and virtually no borrowings. It was translated into MYR 1.60 cash per share. According to prospectus, the Group aims to declare dividends of an amount equal to about 50% of its net profits every financial year. The latest 23 sen dividend per share for FY17 was equivalent to dividend payout ratio of 49%. Compare to last two years, the net cash generated from LCTITAN's operating activities were MYR 1.97bil and MYR1.74bil respectively.


 Overall, its financial strength and cash flow are very healthy. Moving forward, the proceed of MYR3.78b from re-entry to Bursa Securities will be used to drive an expansion plan in ASEAN region to further improve operation and capacity. It would involve the development of USD3.5bil integrated petrochemical facility in Indonesia to increase the Group's ethylene production by up to 1,000,000 tonnes capacity, and construction of a new PP plant in Johor to increase production by 200,000 tonnes.


Moving forwards, LCTITAN's production expected to normalise in 2018, achieve back to original >90% efficiency output. Following the maintenance works on both plants in year 2017, the Group is not likely to make another shutdown on those plants over the next five to six years, so it is a peace of mind of NO MORE plant shutdown again.


Future growth & Expectation for 2018 in Summary:


At present, in short LCTITAN (LOTTE-TITAN) is the cheapest petrochemical stock in Asia market and it offers respectabel divident yields of 7%, remains an attractive option for investor to look into for 2018.

Moving forward, the Group is likely to deliver better result in FY18, with no more scheduled shutdowns of its plants, whcih mean utilisation rates and output will recover and back to normalized >90% yield shortly. Besides, its new TE3 plant had began commissioning in Dec 2017.

Let's assume LCTITAN will be able to deliver sustainable MYR400mil ~ MYR500mil every quarterly basis, it can deliver MYR 1.6bil to MYR 2.0bil range, it earnings per share will be 80.0sen+. With normalized forwarded PE of 12x, the Group will have an intrinsic value of MY9.60, that is >70% growth based on current share price MYR5.65.  




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Chart Stock Name Last Change Volume 
LCTITAN 2.27 +0.08 (3.65%) 903,100 

  3 people like this.
newbie911 Buy !!!
16/03/2018 12:03 AM


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