KUALA LUMPUR: The petrochemical industry is currently in a sweet spot, given the strong market demand coupled with tight supply in the near term, said Maybank Investment Bank (Maybank IB).
In a sector report on Malaysian petrochemicals sector today, Maybank IB said, Petronas Chemicals Group Bhd (PetChem) and Lotte Chemical Titan Holding Bhd (LCT) met its expectations and had good fourth quarter 2017 (4Q17) results.
“Both management teams said that market demand is strong, with tight supply in the near term.
“Furthermore, higher crude oil price is pushing for higher petrochemical prices. To surmise, we can expect a strong coming 1Q18. Stay invested, as both PetChem and LCT are pushing maximum factory utilisation and the results could be a positive surprise,” Maybank IB said.
It said that LCT was its sole ‘buy’ call but cautioned that the company’s earnings were more volatile to the average selling price input cost spread volatility.
“Although PetChem is a ‘hold’ call, we do not rule out the share price overshooting our target price on the potentially strong coming 1Q18 results and the signing of the joint-venture agreement between Saudi Aramco and Petronas that is due to be finalised by the end of 1Q18,” Maybank IB said.
At 3 pm, PetChem shares rose 31 sen to RM8.29 with 5.44 million shares transacted, while LCT shares increased by 19 sen to RM6.29 with 2.9 million shares traded.