Petronas Chemicals falls to lowest since October 2011

KUALA LUMPUR: Shares of Petronas Chemicals Bhd fell to RM5.68, the lowest since October 2011 after its disappointing third quarter results.

At 3.29pm, it was down 27 sen to RM5.68. There were 7.58 million shares.

Since its year high of RM7 on Sept 29, its share price is down 18.8%.

The fall in its share price on Monday also dragged the FBM KLCI deeper into the red.

The KLCI was down 3.29 points to 1,607.54. Turnover was 459.65 million shares valued at RM676.42mil. Declining stocks led advancers 367 to 227 while 293 counters were unchanged.

RHB Research Institute, had in a recent report, said PetChem's Q3 FY12 earnings dropped 38% on-year, on the back of a 15% on-year revenue decline.

The drop in revenue was due to lower product selling prices for its Olefins & Derivatives (O&D) division, as global manufacturing activities declined thus weakening demand.

Issuing the report after an analysts' briefing last week, it said feedstock for PetChem's O&D division was limited as PetChem's supplier undertook a revamping exercise on one of the gas processing plants.

Other factors, it said were weaker product prices for its fertilisers & methanol division due to weaker urea and methanol prices; and 4) lower plant utilisation for its fertilisers & methanol division, due to maintenance for its plants.

"Moving forward, the outlook for both divisions remain challenging on the back of continued uncertainties. For 4QFY12 onwards, we understand that selling prices for the O&D division are expected to remain at current levels as manufacturers remain cautious with purchases and no increase in demand expected," it said.

RHB Research said despite the weaker selling prices, PetChem was targeting overall group plant utilisation rate for FY13 to be at 90%.

"We believe this is achievable, given that in FY12 YTD, plant utilisation has been affected by various external factors, which we believe would not be repeated in FY13," it said.

RHB Research believed the downside to PetChem's share price was limited. It upgraded its call on the stock to Market Perform (from Underperform) with a revised fair value of RM5.99 (from RM6.05) based on unchanged 12 times FY13 EPS.

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