Saturday, November 6, 2010

Petronas Chemicals Group Bhd - Part 2

After compare with Dow Chemical and BASF, lets take a look the PChem financial ratio:

Profit after tax: RM2,594 million
Number of share ex IPO: 8,000 million
EPS: 32.42 cents
NTA ex IPO: RM1.97
Total Asset: RM26,824 million
Gearing almost 0 ex IPO
ROE is 16.45
ROA is 9.67
No growth story to tell, earning flag
Dividend yield: 3% if price at RM5.05

PE is 15.6 if price at RM5.05, 16x if price at RM5.20 (compare to Saudi Basic Industries PE 14x, PTT Chemical Pcl PE 20x)

What is the fair value for PChem?
Normally try not predict the price, but let assume below scenario will happen:

  • PChem with market cap of RM40 billion and become one of the top 10 on Bursa
  • PChem carry Petronas brand, to be included into FBM KLCI
  • Global stock market, especially Dow Chem and BASF continue the up trend
Should the above happen plus the GLC effect, PChem can trade up to 20x PE. However, base on volatile index from others chemical companies, the low side can trade near 12x PE. It will be somewhere between RM4.20 (not likely to happen as earning is up trend now) and RM6.20. Hence the pivot point is around RM4.90, let see how much the price give by institutional through book building on 12 Nov 2010.



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