Petronas Chemicals Group - FY12 results came in largely in line

Period  4Q12

Actual vs. Expectations   FY12 results were within expectations with core profit of RM3.58b coming in 2% above our estimates and 4% above consensus.

 Based on a reported net profit of RM3.52b, there were two key variances with our forecast where: 1) Olefins & Derivatives’ (O&D) EBITDA came in 9% below our estimate (due to a RM490m oneoff expense for the discontinuation of the vinyl business) and 2) an effective tax rate of 15.7% vs. our assumption of 25% (due to c.RM495m in tax incentives received by a subsidiary).

Dividends  A single tier DPS of 14 sen was declared in 4Q12, bringing the FY12 full-year NDPS to 22.0 sen, which was in line with our estimate of 21.9 sen.

Key Results Highlights  QoQ, 4Q12 net profit rose 22% to RM902m while corresponding revenue moved up 11% to RM4.38b. This was mainly due to lower plant maintenance activities and an improved feedstock supply for both segments. O&D posted a 5% QoQ rise in the 4Q12 EBITDA to RM947m while the revenue grew 6% to RM3.08b. Likewise, Fertilisers & Methanol (F&M) reported an EBITDA which surged 58% to RM570m while the revenue rose 27% to RM1.36b.

 YoY, 4Q12 reported net income rose 23% from that of RM735m a year ago while revenue expanded 12% from RM3.90b previously. O&D reported revenue, which rose 5% from RM2.93b on higher prices while its EBITDA contracted 7% over the year. F&M’s EBITDA jumped 29% from RM443m as its revenue soared 30%, thanks largely to higher volumes which off-set the lower prices.

 For the YTD, the FY12 headline net profit dipped 3% to RM3.52b from RM3.64b although the revenue actually rose 2% to RM16.60b from RM16.24b. The improved revenue was mainly driven by lower maintenance activities at O&D and the improved gas supply availability at F&M.

Outlook  A continued rise in volume and prices, as well as, a healthier match of supply and demand should help improve the coming 1Q13 results, where 1H is usually the seasonally low period.

Changes To Forecasts  We maintain our FY13-FY14 forecast for now.

Rating   Maintain OUTPERFORM

Valuation  Our price target is maintained at RM6.86/share based on a CY13 targeted PER of 14.5x. Our targeted PER is in line with the recent PER high of 14.4x in Oct 2011 after normalising from the peak of 20.0x in Mar 2011.

Risks  A weaker USD vs. MYR rate and a sudden drop in crude oil prices

Source: Kenanga