Petronas Chemicals’ 9MFY17 earnings within estimate
KUCHING: Petronas Chemicals Group Bhd’s (Petronas Chemicals) first nine months of financial year 2017 ( 9MFY17) earnings have come in line expectations, and as such analysts believe that the fourth quarter of FY17 (4QFY17) will continue to display strong showings.
In a filing on Bursa Malaysia, Petronas Chemicals reported that for the cumulative quarter ended September 30, 2017, the group’s profit after tax was at RM3.4 billion, an increase of RM1.2 billion or 54 per cent from the corresponding period the previous year.
Cumulative 9MFY17 earnings of RM3.172 billion came in within the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) estimate, accounting for 76.7 per cent of its FY17 earnings forecast, but exceeded consensus estimate by a variance of more than 10 per cent.
MIDF Research believed that 4QFY17 would continue to display strong showings as the plant utilisation rate ( PUR) will be better owing to fewer plant turnaround activities. For 4QFY17, MIDF Research expected another turnaround activity for Petronas Chemicals’ Plant 1 PC Methanol which will bring the overall PUR for the year to more than 90 per cent.
“This is above the world- class performance threshold of 85 per cent,” the research arm said.
“Moving forward, the PUR in FY18 is also targeted to be above 90 per cent.”
As the product prices are expected to remain stable and firm in the near term coupled with stronger PUR moving forward, MIDF Research remained sanguine on Petronas Chemicals whilst expecting the company to report FY17 earnings in excess of RM4 billion for the year.
Meanwhile, AmInvestment Bank Bhd (AmInvestment Bank) noted that the group’s product prices are expected to be buoyant in 4QFY17 with a strong correlation to Brent crude oil prices which have risen 13 per cent since September 30 this year to over US$ 64 per barrel.
“So far in 4QFY17, naphtha has risen 10 per cent while methanol increased by seven per cent, benzene and urea five per cent and polyethylene one per cent,” AmInvestment Bank said.
Although paraxylene slid by four per cent and polypropylene three per cent, the research firm maintained its view that the general trend has turned more positive.
All in, AmInvestment Bank maintained its ‘ buy’ recommendation on Petronas Chemicals.
The research firm’s fair value was based on a FY18F equity value ( EV)/ earnings before interest, tax, depreciation and amortisation ( EBITDA) of eight- fold, on par with the group’s three-year average.
As for MIDF Research, with no changes made to its earnings estimates, the research arm also maintained its ‘buy’ recommendation on Petronas Chemicals.