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LCTITAN - A POTENTIAL MISSING PIECE OF JIGSAW PUZZLE FOR PETRONAS ?
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The recent happening in the oil and gas situation in Malaysia had definitely throw an ultimatum to Petronas in searching for asset to replace the potential revenue and profit losses from the handover of Sarawak oil and gas business.
This is one of the political promises to honor MA63 agreement.
While it will be a good progress for Sarawak, but Petronas being one of the major revenue and income for Malaysia, it is important to seek for other asset to replace loss of revenue and profit.
LCTITAN main business activities are producing chemical product from refined oil and gas material. Lotte Chemical Titan Holding Berhad (LCT) is a Malaysia-based investment holding company, which manages LCT Group. The Group, comprising the Company and its subsidiary, is an integrated petrochemical producer with two principal product categories: Polyolefins, consisting of polyethylene (PE) and polypropylene (PP), and Olefins, including ethylene and propylene, together with other derivatives, such as butadiene, tertiary butyl alcohol (TBA), benzene and toluene. The Company's products are mainly distributed to plastic fabricators and trading houses in both domestic and export markets, such as China, South Korea, Indonesia and other Southeast Asian countries, as well as various European countries. Other business activities of the Group include investment holding and the manufacture of synthetic rubber. Lotte Chemical Titan Holding Berhad's subsidiaries include Lotte Chemical Titan (M) Sdn Bhd, Lotte Chemical Titan Trading Sdn Bhd and Lotte Chemical Titan Corporation Sdn Bhd.
The recent profit margin squeeze had placed a difficult position in LCTITAN to be profitable as factory utilization rate still hang around 60 to 65%. This had caused LCTITAN continuous losses for 9 quarters, forcing the owner to look into selling the whole Malaysia LCTITAN unit and focus on higher margin business - battery material
One of the reason LCTITAN cannot be profitable is due to LCTITAN do not have refinery business. Unlike Petronas Pengerang Integrated Complex, the upstream downstream refinery until end product can provide the company a strong top to bottom approach in operational profitability.
LCTITAN FOR SALE
News of LCTITAN looking to sell is circulating in the market for quite some moment. However, as the industry is very niche and specialize, there are not much buyer in the market. For the case of Malaysia, it will probably only be Petronas Chemical Group.
Petronas probably had saw the potential of oil and gas business handling back to Sarawak state control Petros, and had formulated a move to diverse out from upstream operation into downstream, with focus on specialty chemical.
Petronas Chemical had bought over BASF PETRONAS JV factory plant in Gebeng Kuantan in 2021.
The most recent will be PERSTORP HOLDING AB from Sweden in 2022.
However, the vacuum of RM 100 billion revenue loss is very big, and potentially can see Petronas going to seek more M&A to boost back the revenue and profit.
An opportunity to acquire LCTITAN is very much a big potential and a deal both parties are looking at, LCTITAN being eager to sell, and Petronas being eager to expand into Chemical.
As an investor, I need to inform my reader that I am invested into LCTITAN due to it's attractiveness in potential coming sale, current share price RM 1.02 being just 21% of the NTA RM 4.99. LCTITAN unit also will be able to produce toluene for future MCH transportation which will be profitable.
Reference
IMPORTANT NOTICE
Please be informed that I am not a professional or certified analyst. I am not a licensed consultant, just a normal retail investor. I am just sharing my ideas and opinion on the market outlook. Any company mentioned should not be interpreted as a buy/sell/trade call. Please do your own research and buy/sell/trade at your own risk.
Blog https://targetinvest88.blogspot.com
Telegram https://t.me/targetinvest88
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Discussions
Be the first to like this. Showing 8 of 8 comments
the selling news give it some life... pretty sad , it is a good industry and sold like cheap tickets HEHE
1 month ago
News of Lctitan up for sale is well known circulating in the industry, as well as IBs match maker.
Just a matter of price tag.
Petronas eagerness to expand more to downstream espescially specialty chemical make them very possible for a handshake now
1 month ago
Question
63. News reported that China's petrochemical capacity is poised to see considerable growth, due to refinery switching to produce more petrochemical products than fuels. The local demand cannot absorb this capacity and will lead to export. Will this cause big threats to our company?
What are PCG's competitive advantages if compared to Chinese players? Do PCG have cheaper feedstock costs?
Answer:
China's self-sufficiency policy is indeed causing overcapacity in the market. We expect China to continue its capacity build-up in 2024 until later this decade. While we may expect increased competition, there are selected chemicals and related products that China, as well as other countries in the region, will continue to demand.
PCG’s competitive advantage includes our fully integrated facilities with secure feedstock supply. We have a large and diversified portfolio with close proximity to growth markets that will enable us to continue to serve the Southeast Asian markets.
68. The commissioning of our petrochemical plants at the Pengerang Integrated Complex (PIC) is still ongoing (page 18)
i. What is the total amount invested in Pengerang PetroChemical Plants?
ii. Normally how long does it take for these plants to break even?
iii. What are the expected additional depreciation charges when these plants commence operation?
Answer:
i. The PIC project is financed from external project financing facilities as well as investment by the shareholders via equity and loans.
ii. PIC is expected to provide material contribution to PCG’s future earnings, upon Commercial Operation Date (COD) subject to market conditions and gradual ramp up of plant operating rates.
iii. Upon COD, PIC will be depreciated
69. Any solution from PIC (Pengerang Integrated Complex) to handle the poor margin spread of naphtha feedstock-ethylene derivative?
Answer:
Utilising liquid feedstock is a strategic decision to reduce our dependency on gas while allowing us to grow and provide us the opportunity to produce other products that are otherwise not available
with gas-based plants.
This includes feedstock such as butadiene for our new joint venture project to produce Nitrile Butadiene Latex (NBL) and raffinate for our Isononanol plant in Pengerang, Johor.
Molecules made available from the naphtha cracker will allow us to produce high value derivatives and expand further downstream, whilst pursuing our specialty chemicals agenda. The fluctuation of margin between gas-based and naphtha-based products also provides us with earnings stability.
1 month ago
PREFCHEM capacity:
3.4 million tonnes per annum of Ethylene, Propylene, Butadiene, Benzene and MTBE
1 month ago
Petronas Chemical did buy over BASF PETRONAS plant in gebeng kuantan, did remodification and producing another kind of chemical for export to Europe..
The same can be done to LCTITAN existing plant, just need some remodification.
1 month ago
Lctitan will drop to 50sen, then South Korean group will take it private 2nd round, then relist it 5 years later at super high PE. we all know the modus operandi
1 month ago
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Know what happen to Malaysia’s PRefChem, a JV between PETRONAS and Saudi Aramco, mega cracker plants in Pengerang Integrated Petroluem Complex?
1 month ago