Construction of the 300,000 barrels-per-day (bpd) refinery at the Pengerang Integrated complex is nearing completion, Petroliam Nasional Berhad (Petronas) said in a statement issued late on Monday. (File pic Rapid construction in Pengerang)
KUALA LUMPUR: Petronas Chemicals Group Bhd
(PChem), which has a 50% stake in the Pengerang petrochemicals division, could see a decline in forecast earnings if the Friday morning explosion delays the start of petrochemicals production.
"Given Petronas' strict adherence to health, safety and environment requirements, we expect an extensive investigation into the causes of this incident, which could delay the commencement of petrochemical production," said AmInvestment research in a note.
The Pengerang petrochemicals division is expected to commence production towards the later parts of 2HFY19.
However, AmInvestment expects a six-month delay should the investigations into the incident defer production to next year, resulting in PChem's FY20F earnings declining a slight 3%.
The research house has not incorporated any increase in PChem's output in its FY19F forecasts as the group has guided that average plant utilisation could remain at similar levels to FY16-FY18.
It maintained its forecasts pending further clarity from management. The research house has a buy recommendation on the stock with an unchanged fair value of RM10.40 a share.
On its outlook for 1QFY19, AmInvestment said it remains "sanguine" given that PChem's product prices are strongly correlated to Brent crude oil prices, which have risen 37% since Dec 31, 2018.
"This will be a greater impact to the group than temporary delays in RAPID commencement as a 1% increase in average product prices will translate to a higher 3% rise in net profit," it said.
In Friday morning trade, shares in PChem had slipped as much as 21 sen or 2.3% to RM8.75. At 12.30pm, the counter had partially retraced losses to RM8.81 per share on the back of 7.47 million shares done.
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