Journey to Wealth
Petronas Chemicals - MARKET PERFORM - 29 May 2012
Period 1Q12
Actual vs. Expectations
PCHEM reported 1Q12 net profit of RM1.02b, which beat our estimate but was in line with consensus. The reported results accounted for 30% of our full FY12 estimate and 25% of street's estimate.
Variance between the actual result and our estimate was due to the stronger than expected earnings from the Fertilisers & Methanol (F&M) segment and lower depreciation charges.
Dividends No dividend was declared as expected
Key Results Highlights
QoQ, 1Q12 net profit jumped by 39% on the back of a 12% hike in revenue. This was driven by a higher sales volume by 23% despite the average product prices dipping by 6% and a weaker USD vs. MYR.
Olefins & Derivatives (O&D) posted a 1Q12 EBITDA which rose 26% QoQ while revenue grew 10% over the quarter. This was due to improved demand in 1Q12 as well as the fact that 4Q11 results were partly affected by a power interruption at its ethylene crackers.
EBITDA from F&M jumped 26% QoQ in 1Q12 as revenue gained 15% due mainly to improved methane gas supply that helped improved the plant utilisation for its methanol facility.
YoY, the 1Q12 net income rose 12% while revenue improved marginally by 1%. The higher profit was mainly due to a lower minority interest. At the PAT level, earnings contracted by 2% due to a lower taxation last year on tax benefits in one of its associate companies.
O&D reported EBITDA which dipped by 5% YoY in 1Q12 while revenue slid 1% YoY due to a downward pressure on prices.
F&M's 1Q12 EBITDA meanwhile surged 59% YoY while revenue rose 7% YoY on the back of strong urea and methanol prices. In addition, the F&M's facilities reported a higher plant utilisation with improved plant performance.
Outlook In view of the weak crude oil prices of late, which has led partly to a drop in petrochemicals prices, 2Q12 is likely to be a weak quarter. That said, we believe PCHEM is likely to beat our estimates in FY12.
Change to Forecasts
Keeping our estimates for now pending the company's conference call with analysts tomorrow.
Rating MAINTAIN MARKET PERFORM
Valuation Retaining our price target of RM7.02/share based on CY12 16.5x PER for now pending the conference call tomorrow.
Risks Weaker USD vs. MYR and a sudden drop in crude oil prices.
Source: Kenanga
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
