PCHEM’s 1H13 net profit of MYR2.06bn was within our but slightly above consensus, accounting for 48.4% of our and 53.0% of consensus’ full-year  forecasts.  While  profits  improved  overall  y-o-y,  both  revenue and  net  profit  were  weaker  q-o-q  due  to  lower  volumes  as  well  as product  prices.  We  raise  our  FV  to  MYR6.71  from  MYR6.55  as  we  roll over our valuations to FY14 earnings. Maintain NEUTRAL.

- Better  y-o-y.    PCHEM’s 1H13 net profit of MYR2.06bn (-13.3%  q-o-q, +10.1%  y-o-y)  was  within  our  but  slightly  above  consensus,  accounting for 48.4% of our and 53.0% of consensus’ full-year forecast. The group performed better y-o-y, supported by a small 0.5% uptick in revenue and better  operating  performance,  bolstered  by  improved  gas  supply  to  its methanol  facilities.  Meanwhile,  profit  was  lifted  by  stronger  product spreads, with higher product prices and lower feedstock costs recorded.

- Worse  showing  sequentially.  PCHEM’s 2Q13 revenue and net profit fell 13.1% and 13.3% respectively compared with 1Q13. This was mainly due  to  higher  plant  maintenance  activities  undertaken  in  the  current quarter, coupled with lower volumes and product prices.

- Maintain  NEUTRAL.  While  the  global  outlook  for  petrochemicals  is encouraging, we retain our NEUTRAL recommendation on PCHEM. The stock is still reasonably attractive from a dividend perspective as it offers yields of 4.1% and 4.3% for FY13 and FY14 respectively. 

- Raising  FV  to  MYR6.71.  We  lift  our  FV  to  MYR6.71  (previously MYR6.55)  as  we  roll  over  our  valuation  to  FY14  earnings  against  an unchanged  target  P/E  of  12x.  This  is  at  a  30%  premium  to  its  peers within  the  region,  which  are  trading  at  an  average  9x  FY14  EPS.  We believe  that  the  premium  is  justified  due  to  the  group’s advantage  in having relatively cheaper feedstock cost.  

Source: RHB