Titan wait
IF you are a contributor to the Employees Provident Fund (EPF), you can’t help feel relieved that the fund’s stake in Lotte Chemical Titan Holding Bhd (Lctitan) was at its height not more than 106.23 million shares in the first-quarter (1Q) of 2019 considering where the chemical producer’s share price is resting now.
That stake has been cut to 4.84 million, according to Bloomberg and very likely at a substantial loss on investment considering the chemical producer’s initial public offering (IPO) shares were sold for RM6.50 a piece when it went public in July 2017 as the largest listing on Bursa Malaysia with the EPF subscribing to 89.3 million share or 3.93%.
Lctitan has been one of the stocks that promised much – if you had believed the analyst reports – but delivered little since its relisting.
Lctitan closed the trading week at RM1.32, some 80% below its IPO price and way below if net tangible asset per share of RM5.69. From a technical perspective, its price chart suggests further weakness ahead which could see it retest its historic low of 97.5 sen.
After having posted some half a billion ringgit in losses for the second and third quarters, and 17.4 sen per share loss for the nine months, a dividend payout this year may have to be foregone.
Analysts are forecasting the company to remain loss-making in the fourth quarter although the level of losses is set to narrow.
With its multinational business model, Lctitan is suffering from the headwinds triggered by the Ukraine-russia conflict, higher energy prices, China zero-covid policy and weakening global economy as a result of the high inflation and interest rate environment.
Questions over demand for its products going forward with a global recession looming, lower cracker utilisation and prices of polypropylene, polyethylene, ethylene and aromatics will affect its margins.
The economics of producing plastics is set to remain challenging for Lctitan, more so when Petroliam Nasional Bhd commissions its petrochemical facilities in Pengerang, Johor.
Many are betting that Lctitan prospects will hinge on its growth plan especially with the construction of the Lotte Chemical Indonesia new ethylene (Line) facility in Indonesia, works on which commenced in the first quarter of 2022, and is scheduled to be completed in 2025.
Indonesia may present a growth market but one has to consider that global petrochemical capacity is forecast to grow some 50% to 3,000 million tonnes per annum (mtpa) by 2030 from about 2,129 mtpa in 2019 with China expected to add 28% of the global capacity.
If you were a shareholder in the company since its IPO, you have to hope that Lctitan’s bet on the new cracker will pay off in a big way and its share price recovers at least most of the losses since listing. But of course that will be another threeto-four-year wait.