Petronas Chemicals Group Bhd's 9MFY11A results (it changedits  year-end from 31 Mar to 31 Dec) werewithin expectations. This  wasdespite  its  3QFY11A performance being affected by lowersales volume and lower average selling prices of its petrochemicals products.We continue to like the company's strong backing from Petronas Group,especially in keeping its feedstock prices low. Maintain Buy, with an unchangedfair value of RM9.00, based on the existing PER of 18x FY12 EPS.

Within expectations.The 9MFY11A results were within consensus and our expectations, making up 97%and 95% of  both  FY11 forecasts respectively.  Note that the group had earlier changed itsfinancial year-end to December and that  our  FY11 forecasts only represent a 9-monthfigure. The 3QFY11A revenue and net profit of RM3,904.0m and RM735.0m were15.8% and 36.0% lower q-o-q due to the 15% drop in sales volume and 6%  fall in average selling price. Meanwhile, its  olefins plantswere affected by the softening in certain product markets and power disruptionat Petronas Chemicals Ethylene SB while the fertilizer and methanol plants wereconstrained by gas supply limitations. Other than these, the contribution fromits associates in 3QFY11A sank 48.1% q-o-q due to lower production at one ofthe associates and jointly controlled entity. Finally, on a YTD comparison, theoverall performance in FY11A was enhanced by the higher selling prices ofpetrochemical products, although this was partially  offset by theweakening of USD against ringgit.

Maintain Buy.  Our fair value for Petronas Chemicals remainsunchanged at RM9.00,based on the existing PER of 18x FY12 EPS. We like thecompany's strong backing from Petronas Group, especially in keeping itsfeedstock prices low. Nevertheless, the risks to our view are that thecompany's daily operation is subject to uncontrollable factors such as: i)fluctuations in the international prices of petrochemical products, ii) globaleconomic conditions, and iii) utilization of its production facilities based ondemand.

Source: OSK188