Period  4Q13/FY13

Actual vs. Expectations  FY13 net profit of RM3.15b came in 13% and 14% below our estimate and market consensus, respectively.

 The disappointing set of results were mainly due to lower sales volume in 4Q13 despite improved ASP due to higher maintenance activities in both Olefins & Derivatives (O&D) and Fertiliser & Methanol (F&M) segments and interruption in utilities supply at the main cracker, related downstream facilities as well as aromatics and ammonia plants

Dividends  A NDPS of 12 sen was declared in 4Q13, bringing FY13 NDPS to 20 sen which is lower than our estimates of 22.7 sen and FY12 NDPS of 22 sen.

Key Results Highlights FY13 net profit fell 11% to RM3.15b from RM3.52b in FY12 as revenue dipped 8% over the year due to lower sales volume. The O&D segment reported revenue which dipped 6% to RM11.23b on lower

volume especially the high margin ethane base products, which was affected by maintenance activities in 2H13. As such, O&D’s EBITDA contracted 12% to RM3.40b. Similarly, F&M also underwent maintenance activities for its methanol facilities during the year, resulting in revenue declining 14% to RM4.12b while EBITDA fell 10% to RM1.73b as sales volume decreased.

 4Q13 net profit plunged 29% QoQ to RM450m due to the plant maintenance for both its methanol facilities in addition and its O&D division which was prolonged from 3Q13. This led to a 5% drop in revenue as sales volume declined although it was partly cushioned by better ASP. YoY, 4Q13 revenue contracted 24% while net profit plunged 50% for the same reason stated above.

Outlook  Earnings prospects remain challenging in FY14 due to plant maintenance activities for both segments. In 1Q14, the F&M’s methanol facilities are facing gas supply constraint as a result of extended upstream facilities shutdown to conduct offshore technical works.

 Separately, PCHEM had entered into a settlement agreement with PETGAS for early termination of the supply of utilities and electricity as a result of its vinyl business discontinuation. PCHEM had provided for the RM97.0m settlement amount in FY13.

Changes To Forecasts We are keeping our FY14 estimates unchanged for now, pending a conference call with management this evening.

Rating Maintain MARKET PERFORM

Valuation  TP is maintained at RM6.97/share, based on CY14 14x PER which is its 2-year average valuation.

Risks  A reversal of the current strong USD/MYR rate and a sudden drop in crude oil prices.

Source: Kenanga