Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Wednesday, February 23, 2011

Petronas Chem tipped to post strong Q3 results

Analysts have tipped strong third quarter financial results for Petronas Chemicals Group Bhd (PCG) (5183), one of Southeast Asia's largest petrochemicals producer, as it saw higher demand and margins for its products.

The subsidiary of national oil firm Petroliam Nasional Bhd may show a net profit of RM817 million, a 62 per cent increase from the previous quarter's RM510 million.

This was estimated by Wong Chew Hann, who tracks the stock at Maybank Investment Bank Research (MIB).

PCG, which was listed on Bursa Malaysia last November, is expected to release its maiden quarterly financial results this week.

"The drivers (for third quarter profit) are higher utilisation rates (more than 86 per cent), underpinned by strong global demand and higher product margins," Wong said in a report recently.

Product margins, which are the difference between the selling price of the product and raw material costs, have risen by 15 per cent from the second quarter.

Wong noted that product prices were higher due to a global commodity run, while raw material prices were fairly stable.

A fire that broke out at the group's aromatics plant in Kertih, Terengganu, on Christmas eve isn't likely to have hurt its results much, she said, adding that the 18-day plant closure may have resulted in a total economic loss of about RM6 million.

PCG's fourth quarter results may look even better as margins continue to rise on the back of higher commodity prices, she added.

Wong sees PCG making a net profit of RM3.2 billion for the full financial year (FY) ending March 31 2011 compared with RM2.2 billion in the previous year.

She maintained a "buy" recommendation on the stock with a target price of RM6.70. The stock last traded at RM6.21.

Credit Suisse, which initiated coverage on the stock last week, noted that its forecast for PCG's average annual growth rate for earnings, at 18.1 per cent for FY11 to FY13, is above the expected growth of PCG's regional peers, which stood at between 0.6 per cent and 8.5 per cent.

"Its earnings growth is expected to be driven by improving efficiency during FY11 to FY12, while the recovery of the ethylene cycle is expected to drive its earnings beyond 2012," the foreign research house said.

It rated the stock an "outperform" and pegged it at a RM7.50 target.

PCG is the largest petrochemical player in the Southeast Asian markets by market capitalisation and earnings.

Its initial public offering, which raised RM12.8 billion, was Southeast Asia's largest ever.

Read more: Petronas Chem tipped to post strong Q3 results

February 24, 2011 06:34 ET (11:34 GMT)
KUALA LUMPUR (Dow Jones)--Petronas Chemicals Group Bhd. (5183.KU) Thursday said its earnings in the third quarter more than doubled from a year earlier due to higher petrochemical product prices and following the acquisition of a new subsidiary.
The unit of national oil company Petroliam Nasional Bhd. said in a stock exchange filing that its net profit for the three months ended Dec. 31 rose to MYR874 million from MYR337 million. Revenue grew to MYR3.90 billion from MYR2.99 billion.

Petronas Chemicals said the better earnings were a result of petrochemical product price hikes which outstripped the increase in the group's feedstock costs. The growth was also supported by contributions from the recently acquired Polyethylene Malaysia as a wholly-owned subsidiary from September 2010, it added.

"The board expects the results of our operations for the financial year ending 31 March 2011 to be satisfactory," the company said.

For the nine-month period, net profit rose 57% to MYR2.06 billion from MYR1.32 billion a year earlier. The company said overall spreads between product prices and feedstock prices remained robust. "This resulted in operating profit of MYR2.5 billion, higher by MYR501 million, despite the inclusion of once-off negative goodwill of MYR175 million on acquisition of OPTIMAL Glycols (Malaysia) Sdn. Bhd. in the corresponding period," Petronas Chemicals said.

On a recurring income basis, the company said it registered an earnings before interest, tax, depreciation and amortization of MYR3.2 billion, compared to MYR2.3 billion a year earlier.

Revenue for the nine-month period increased to MYR10.23 billion from MYR8.21 billion.

Petronas Chemicals made its debut on the Malaysian stock exchange in November. The company raised MYR12.8 billion ($4.18 billion) through its initial public offering, making it the biggest ever IPO in Southeast Asia.

- By K.P. Lee, Dow Jones Newswires; (603) 2026 1233;

Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day.

(END) Dow Jones Newswires
February 24, 2011 06:34 ET (11:34 GMT)
Copyright (c) 2011 Dow Jones & Company, Inc.

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