The year 2017 is looking to be a record year for Petronas Chemicals Group Bhd (PetChem) in earnings delivery and so would the dividend per share (DPS), said Maybank Investment Bank (IB) Research.
In a research note today, Maybank IB said PetChem has announced a first interim dividend of 12 sen a share, which is a 71 per cent growth year-on-year and represents a 43 per cent payout of its first half 2017 profit after tax and minority interests (PATAMI).
“PetChem typically pays 50 per cent of PATAMI as dividends and there is scope for PetChem to meet our 25 sen full-year forecast.
“This will be its record annual DPS since inception,” it said.
Maybank IB said PetChem has stated that there will be pricing pressure in third quarter of 2017 for urea and ammonia due to sufficient capacity and seasonality aspects.
It said on the flip side, mono-ethylene glycol price is rising and other chemical prices such as ethylene, polymers, aromatics and methanol are fairly stable.
“On balance, we think petrochemical prices will range bound throughout the remainder of the year given global supply-demand is well balanced and crude oil prices are also moving in a tight band.
“Our earnings forecasts have also imputed lower factory utilisation of 87 per cent in second half of 2017 versus first half of 2017’s 94 per cent, leading to lower second half earnings forecasts,” it said.
Maybank IB said valuation wise, PetChem is undemanding trading at 7.2 times, which is at a 14 per cent discount relative to global peers despite it having the best balance sheet and cash flow.
Maintaining PetChem’s earnings forecasts, Maybank IB had also maintained its “buy” call with an unchanged target price of RM8.10 — on par with global peers.