04 November 2010

New Listing: Petronas Chemicals Group

After the successful listing of MMHE, Petronas is going ahead with the listing of another subsidiary - Petronas Chemicals Group Bhd (PCG). The IPO, which could raise as much as RM13.02bn (US$4.2bn), would be the largest in Southeast Asia, according to term sheet.

Below is the summary of the IPO:
  • PCG is one of the leading integrated petrochemicals producers in Southeast Asia region, with 45% of revenue derived locally.
  • Better profit margin in rising crude oil environment as prices of raw material was supplied by Petronas.
  • The management has earmarked to 50% payout of its earnings, which translates to a dividend yield of about 4%.

At retail price of RM5.05, the historical price-earnings ratio (PER) works out to be about 16 times.

Upon listing...
  • EPF and Kumplan Wang Persaraan will be cornerstone investors.
  • To expand its business and synergistic-growth acquisitions for the next 5 years.
  • To consolidate its petrochemicals activities to increase the efficiency and profitability of its operations.
  • To expand its production capacity via plans to develop a Greenfield ammonia and urea production facility in Sabah
Top 5 KLCI stock?
With market cap of around RM40bn, PCG is set to be among top 5 stocks on KL market. Thus, register as a member of KLCI, right behind CIMB, Maybank, Sime Darby and Public Bank.

Given the lukewarm respond to MMHE listing, PCG will set to repeat the spectacular debut listing. Undeniably, this is good BUY (if you can get it). However, I do not view this as an trading stocks given its mere 4% retail portion.

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