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%.

Valuations...
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.

Conclusion:
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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