Stock Name: PCHEM
Company Name: PETRONAS CHEMICALS GROUP BHD
Research House: OSK

KUALA LUMPUR: OSK Research is maintaining its Neutral call on Petronas Chemicals Group Bhd and retains its FY11-12 forecasts following the latest corporate development involving its parent Petroliam Nasional Bhd and BASF.

Petronas and BASF will undertake a joint feasibility study to produce specialty chemicals in Malaysia and are considering investing RM4.0 billion ('1.0 billion).

'Our target price for the company remains at RM5.51 based on a PER of 16 times FY12 EPS. We view the MOU positively,' OSK Research said.

The research house said BASF is an established petrochemical company and it would also be more commercially viable to jointly undertake the investment since the specialty chemicals may need RM4.0 billion in investments.

OSK Research said the development of a new specialty chemical products portfolio is in line with Petronas Chemicals' goal to further grow the downstream petrochemical business as part of its integrated plan to be a key player in the region as well as to spur domestic investment in the O&G and petrochemical industries.

'Despite our Neutral call on the stock, we continue to like the company's strong backing from Petronas Group, especially in keeping its feedstock prices low, and attractive dividend payout ratio of 50%, which is the highest among its closest peers,' it said.