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Research houses positive on PetChem on plan to acquire Sweden's Perstorp

18/05/2022 11:13 AM

KUALA LUMPUR, May 18 (Bernama) -- Research houses have maintained their positive stance on Petronas Chemicals Group Bhd (PCG) following its announcement to acquire Perstorp Holding AB.

PCG, Malaysia's leading integrated chemicals producer, said it has signed a securities purchase agreement (SPA) to acquire 100 per cent of Swedish global sustainable specialty chemicals provider Perstorp Holding AB for RM10.5 billion.

In a research note today, Maybank Investment Bank (Maybank IB) maintained its ‘buy’ call on PCG with a target price (TP) of RM11.20 per share.

The research house said if the SPA is successful, this will mark PCG's second inorganic acquisition in the high-barrier, high-margin specialty chemical space in line with its management’s 2030 aspiration of deriving at least 30 per cent of revenue from its non-traditional (olefins & derivatives/fertiliser & methanol) portfolio.

"Crucially, we opine that Perstrop’s synergistic integration as a wholly-owned subsidiary to be value-accretive as it will expand PCG’s nameplate capacity by 18 per cent and boost earnings before interest, tax, depreciation & amortisation/profit after tax and minority interest by 14 per cent/6.0 per cent.

"Owing to PCG’s end-December net cash pile of RM14 billion, the transaction will also be non-dilutive," it added.

Maybank IB said it maintained its earnings forecast, pending a management update later today.

In another note, RHB Research maintained its ‘buy’ stance in PCG with 22 per cent upside TP of RM12.21.

"While we acknowledge the rationale for the Perstorp acquisition - to strengthen PCG’s petrochemicals portfolio and diversify into specialty chemicals - we are watchful over the sustainability of record-high earnings, which would otherwise suggest higher forward valuation if the price turns, given Perstorp’s volatile earnings track record over the past five years.

"We maintain our earnings estimate pending further management clarification," it added.

Echoing the other research houses, AmInvestment Bank also reiterated its ‘buy’ call on PCG with a higher fair value of RM11.10 (from an earlier RM10.90/share).

"We have also raised full financial year 2023 (FY23F–FY24F earnings by eight per cent -- 9.0 per cent to account for the value-accretive contribution from the group’s proposed acquisition of Perstorp.

"We are positive on this development, which will strengthen PCG's basic petrochemicals portfolio and accelerate its expansion into higher margin derivatives, specialty chemicals and solutions," AmInvestement Bank said.

At 10.39 am, PCG's shares rose six sen to RM10.08 with 933,600 shares transacted.



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