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PTT Global Chemical

Indonesia, new target for overseas growth BUY

PTT Global Chemical Plc (PTTGC)

PTTGC is focusing on investing in downstream specialty products in

order to strengthen its business, Vencorex in particular. The

company is also marching forward with overseas investment, with

Indonesia as a target for future growth.

- Indonesia, new target for overseas growth

PTTGC still keeps its previous business strategy to focus more on

downstream specialty products through existing subsidiaries e.g. Vencorex

and NatureWork. At the same time, the company is marching forward with

new investment overseas, with Indonesia as a potential target for future

growth in the long run, given its demands for petrochemical and refinery

products that are larger than domestic supply. For the outlook in 2H14, the

olefins business will play a major role in boosting the company's growth

from an uptrend of HDPE, LDPE, and LLDPE spreads.

- Strong rebound likely in 2H14

Preliminarily, we maintain our FY2014 earnings forecast. 2H14 net profit is

projected to grow as much as 42.5percent from 1H14 because 1) olefins and

polymer factories would resume working at their full capacity after the

shutdown in 1H14 and 2) olefins spread would widen since the recovering

economy would help boost the demand. Meanwhile, the aromatics and

refinery businesses are likely to stay flat from 1H14. Overall, FY2014 profit

is projected to decline 9.8%yoy as a result of weak earnings in 1H14, but a

strong profit rebound of 16.5%yoy is foreseen in 2015.

- Buy on weakness

2014 fair value is B84. We reiterate to buy PTTGC because the share price

has partially absorbed the negative factors. P/E ratio of only 9.9x is lower

than the regional average, while an average dividend yield is as high as

5% p.a

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