LOTTE Chemical Titan Holdings Bhd’s fire accident at its PP3 expansion plant in Pasir Gudang, Johor was reported to be minor, according to CIMB Research.
Plants are operating as usual with no interruptions.
Meanwhile, after the disappointing second quarter 2Q17 results due to the unplanned shutdown because of water shortage and multiple non-recurring items, CIMB Research expects Lotte’s net profit to recover in the third quarter of 2017.
“We project average utilisation rate of 80% in the third quarter of 2017 for Lotte.
“This is higher than the 70% in second quarter due to water shortage and 60% in the first quarter due to the 53-day planned shutdown of naphtha cracker #2 (longer than the planned shutdown of 33 days in 3Q17 for naphtha cracker #1).
In the meantime, CIMB Research has projected Lotte to continue to improve its overall utilisation rate from 80% in the third quarter of 2017 to 90% in the fourth quarter of 2017, bringing the average utilisation rate for FY17 to 75%.
“This is in line with our projection. We believe the third quarter and fourth quarter 2017 earnings will be strong at RM0.2bil-RM0.5bil per quarter, thanks to high margins for HDPE-naphtha, benzene-naphtha and PP-naphtha, which would more than offset the weak BD-naphtha margin,” the house said.
The research firm does not think that the water damage caused by the unplanned water shortage during the second quarter would recur because Lotte plans to expand its water storage capacity from one day currently to two days by the end of fiscal 2018 forecast.
The company has decided to only start plant operations when it is confident that there will be sufficient and consistent water supply.
The stock is trading at only 3.2 times FY17 forecast earnings before interest, tax, depreciation and amortisation, significantly below its regional peers’ average of 8.3 times.
CIMB thinks Lotte remained attractive given the anticipated strong earnings growth recovery post second quarter 2017.
This is driven by utilisation rate improvement that is expected to go on in the third to fourth quarter of 2017.
LOTTE CHEMICAL TITAN HOLDING BERHAD ("Lotte" or "the Company") Fire Incident Update on the TE3 Project on 20 September 2017 (Pasir Gudang) Following our announcement on 21 September 2017, the Company wishes to update that we have completed the assessment of the minor fire incident that had occurred at the site of our new TE3 Project.
The fire was due to contact between residual vapor from the Quench Water drain pit and the steam line. The damage caused to the TE3 Project is minimal and we estimate a loss incurred of not more than RM50,000 to replace burnt cables. There is no damage to the other plants and they are running normally.
We have resumed the preparation of the TE3 Project for commissioning and the commercial startup is on target by fourth quarter 2017.
The fire incident is not expected to have a material effect on the earnings, net assets and gearing of the Company and the Group for the financial year ending 31 December 2017.
KUALA LUMPUR (Sept 26): Maybank Investment Bank Bhd said Lotte Chemical Titan Holding Bhd shares may track costlier petrochemical, amid crude oil price gains.
In a report today, Maybank analyst Mohshin Aziz said Maybank maintained its ‘Buy’ call on Lotte shares, with an unchanged target price at RM7.85.
At 10:04am, Lotte shares were traded at RM5.27, valuing the company at RM11.93 billion. At 11:04am, the stock changed hands at RM5.26.
Mohshin said: "The focus will resume to the recent surge in crude oil prices and the likelihood for petrochemical prices to track crude oil prices. We believe the share price will react positively, as Lotte is a direct beneficiary of higher petrochemical prices."
Crude oil prices have risen. Reuters reported London Brent crude for November delivery was up 8 cents at US$59.10 a barrel by 0037 GMT. It settled up 3.8% on Monday, after earlier touching a 26-month high.
Global marker Brent hit a two-year high on Monday, helped by output curbs by the Organization of Petroleum Exporting Countries and other major producers, although U.S. crude has lagged behind, amid concerns U.S. production growth could stoke oversupply.
That is what they initially said when Lotte was listed since lotte's raw material input comes most from oil unlike Petronas. If they compare Lotte with Petronas, they use this to justify higher pricing for Petronas. Now, suddenly they say the reverse. Maybe somebody should ask this analyst not to factor in speculation into his report.
If the price of yr raw materials goes up, it is a disadvantage to u rather than an advantage like those glove makers. The reason being that u are unable to pass the entire cost to yr customers.
Petrochem market is very different from simple glove market. If market speculate that chem prices will go up, they will stockpile more and drive the prices up themselves due to heightened demand. You dont get this in glove market as the supplier is the one driving the price up. On top of that, the company will book inventory gains as well.
all lct need is just 300m earnings nxt qtr, if u believe can buy now and earn later i chose to believe based on : - its higher product price due to us shutdwon - oil still below 60usd - many still fear to go in
Post a Comment
People who like this
New Topic
You should check in on some of those fields below.
Title
Category
Comment
Confirmation
Click Confirm to delete this Forum Thread and all the associated comments.
New IPO: The largest mini-market player and a leading groceries retailer in Malaysia, 99 Speed Mart Retail Holdings Bhd aims to list on the Main Market!
MQ Trader 656 views | 3 d ago
0:17
New IPO: An enterprise IT solutions provider that provides implementation services, maintenance, support and professional services, Vetece Holdings Bhd aims to list on the Ace Market!
MQ Trader 648 views | 7 d ago
0:17
New IPO: A manufacturing and trading of biomass fuel products, particularly PKS and wood pellets company, Elridge Energy Holdings Bhd aims to list on the Ace Market!
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....
kuaTAKtahu
1,460 posts
Posted by kuaTAKtahu > 2017-09-25 11:48 | Report Abuse
LOTTE CHEMICAL TITAN HOLDINGS BHD
By CIMB Research
Add (maintained)
Target Price: RM8.50
LOTTE Chemical Titan Holdings Bhd’s fire accident at its PP3 expansion plant in Pasir Gudang, Johor was reported to be minor, according to CIMB Research.
Plants are operating as usual with no interruptions.
Meanwhile, after the disappointing second quarter 2Q17 results due to the unplanned shutdown because of water shortage and multiple non-recurring items, CIMB Research expects Lotte’s net profit to recover in the third quarter of 2017.
“We project average utilisation rate of 80% in the third quarter of 2017 for Lotte.
“This is higher than the 70% in second quarter due to water shortage and 60% in the first quarter due to the 53-day planned shutdown of naphtha cracker #2 (longer than the planned shutdown of 33 days in 3Q17 for naphtha cracker #1).
In the meantime, CIMB Research has projected Lotte to continue to improve its overall utilisation rate from 80% in the third quarter of 2017 to 90% in the fourth quarter of 2017, bringing the average utilisation rate for FY17 to 75%.
“This is in line with our projection. We believe the third quarter and fourth quarter 2017 earnings will be strong at RM0.2bil-RM0.5bil per quarter, thanks to high margins for HDPE-naphtha, benzene-naphtha and PP-naphtha, which would more than offset the weak BD-naphtha margin,” the house said.
The research firm does not think that the water damage caused by the unplanned water shortage during the second quarter would recur because Lotte plans to expand its water storage capacity from one day currently to two days by the end of fiscal 2018 forecast.
The company has decided to only start plant operations when it is confident that there will be sufficient and consistent water supply.
The stock is trading at only 3.2 times FY17 forecast earnings before interest, tax, depreciation and amortisation, significantly below its regional peers’ average of 8.3 times.
CIMB thinks Lotte remained attractive given the anticipated strong earnings growth recovery post second quarter 2017.
This is driven by utilisation rate improvement that is expected to go on in the third to fourth quarter of 2017.
Read more at http://www.thestar.com.my/business/business-news/2017/09/25/analyst-reports/#ab8QIowPJwUh3lLw.99