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Bursa Malaysia - 5183
Bloomberg - PCHEM:MK
Reuters -  PCGB.KL
Yahoo - 5183.kl

Sector            : Industries Product & Service
Sub Sector    : Chemicals
Focus             : Olefins, Fertilisers and Methanol

Company Profile

Petronas Chemicals Group Bhd (PCHEM) is an integral chemicals producer in Malaysia. PCHEM had a combined production capacity of 12.8 million tonnes per annum from 11 production plantation sites in Malaysia, Netherlands, Canada, Singapore and Germany. In September 2019, PCHEM acquired Da Vinci Group for EUR 163,000,000 which focuses on silicone blending facilities. PCHEM is the largest methanol producer in Asia and 4th largest across the world.

PCHEM is operated in two major business segments:

  1. Olefins and Derivatives

  • Manufacturing and marketing of wide range of olefin and polymer products, which are as basic feedback for other products, to intermediate product including basic and high performance chemicals

  • Contribute the largest percentage of revenue in 2020 57.95 %, which had decrease from 70 % in 2016

  • Unstable profit margin with the range of 24.41 % in 2017 to 3.69 % in 2020

  • Profit highly correlated with crude oil price. Profit increase with crude oil price

  1. Fertilisers and Methanol

  • Manufacturing and marketing methanol and range of nitrogen, phosphate and compound fertiliser.

  • Contribute 36.98 % revenue in 2020

  • More stable income, profit margin around 25 %

Income Statement


In million

31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

Revenue

14,362

16,370

19,576

17,407

13,860

Cost of Goods Sales

10,837

11,914

12,702

11,021

8,536

Earning Before Tax

1,857

3,155

5,650

5,236

4,110

Nett Profit

1,586

2,795

5,058

4,414

3,222

5 Years CAGR of Revenue

0.71 %

5 years CAGR of Nett Profit

-13.22 %


PCHEM  nett profit had drop significantly from RM 2,795,000,000 in 2019 to RM 1,586,000,000 in 2020, a decrease of 43.26 % compared to revenue which dropped 12.27 %. This is mainly due to the low crude oil price in 2020 which will affect the profit margin of Olefins and Derivative segment from 11.82 % in 2019 to 3.69 % in 2020. Q1 2021 showed an increase in the Olefin and Derivative segment profit due to improvement of the crude oil price. Q1 2021 show the highest profit margin for both operating segments since Q2 2018.



Aside year 2020 which was caused by the Convid 19 pandemic, PCHEM revenue and profit had dropped in 2019.


Balance Sheet



In million

31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

Debt

3,180

2,580

2,160

137

206

Debt to Equity

0.10

0.09

0.07

0

0.01

Current Ratio

5.09

4.90

3.28

3.23

4.69

Cash / Current Asset

77.03 %

76.36 %

73.57 %

61,67 %

64.41 %


PCHEM had a low Debt to Equity ratio which means PCHEM balance sheet is healthy and able to sustain for long term. Aside from that PCHEM current ratio is high and in upward direction since 2017. PCHEM is also cash rich where 77.03 % of its current asset is cash.


Cash Flow


In million

31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

Cash Flow from Operation

3,015

5,544

6,667

5,311

3,958

Cash Flow from Investing

-1,444

-3,027

-1,883

-3,370

-2,824

Cash Flow from Financing

-792

-2,758

876

-2,545

-2,762

Free Cash Flow

1,539

3,193

3,710

1,865

530

5 years CAGR of Cash Flow from Operation

-5.30 %

5 years CAGR of Free Cash Flow

23.76 %


5 year CAGR of Cash Flow from Operation is -2.28 % mainly due to decrease in nett profit. However the 5 year CAGR of free cash flow is at 23,76 %.


Per Share Analysis




31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

Share Outstanding 

8,000,000,000

8,000,000,000

8,000,000,000

8,000,000,000

8,000,000,000

Price 31 Dec

7.43

7.35

9.29

7.7

6.98

BV/Share

3.71

3.67

3.81

3.48

3.37

P/E

37.48

21.03

14.69

13.96

17.33

5 years CAGR of Price 

1.26 %


PCHEM price 5 years CAGR increase at 1.26 while the 5 year CAGR of free cash flow is at 23.76 %. In 2020 PCHEM P/E had increase to 37.48 due to lower profit. Despite lower profit in 2020 PCHEM book value per share had increase from RM 3.67 in 2019 to RM 3.71 in 2020, 1.02 % increase.



Dividend




31 Dec 2020

31 Dec 2019

31 Dec 2018

31 Dec 2017

31 Dec 2016

Dividend Per Share

0.12

0.18

0.32

0.27

0.19

Dividend Payout

60.53 %

51.52 %

50.61 %

48.94 %

47.18 %

Dividend Yield

1.62 %

2.45 %

3.44 %

3.51 %

2.72 %

10 year Malaysia Government Bond

2.68 %

3.33 %

4.01 %

3.94 %

4.24 %


Despite having high dividend payout ratio, PCHEM had lower dividend yield compare to 10 year Malaysia Government Bond.


Research Report



Investment House

Date

Target Price

AMINVESTMENT BANK BERHAD

28 May 2021

RM 10.90

KENAGA INVESTMENT BANK BERHAD

28 May 2021

RM 8.90

HONG LEONG INVESTMENT BANK BERHAD

28 May 2021

RM 8.75

MAYBANK INVESTMENT BANK BERHAD

28 May 2021

RM 8.25

Average Price Target


RM 9.20



Peer Analysis




PCHEM

ANCOM

HEXTAR

KARYON

LUXCHEM

LCTITAN

P/E

25.02

90.12

29.18

27.30

13.56

9.42

Dividend Yield

1.49

0

2.45

3.7

3.77

1.06


PCHEM had higher P/E compared to LUXCHEM and LCTITAN. Asides that PCHEM dividend yield is lower than HEXTAR, KARYON and LUXCHEM.


Technical Analysis


PCHEM daily chart show ascending triangle. If the price able to breakout at price RM 8.35 the price can continue to move up.


Weekly chart show ascending triangle with the price had break out RM 7.70. Price is might continue upward trend.



http://ivkls.blogspot.com/2021/06/stock-review-pchem-5183-petronas.html

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