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PChem buy reiterated with a higher fair value

PChem buy reiterated with a higher fair value

Petronas Chemicals Group Bhd (PetChem) has signed a securities purchase agreement to buy Perstorp Holding AB, a worldwide speciality chemicals firm focused on sustainability, for €1.54 billion (RM7.02 billion).

Financière Forêt S.à.r.l, a subsidiary of European private equity firm PAI Partners, inked the transaction. Perstorp Group is valued at €2.3 billion following the transaction.

With seven manufacturing facilities and three R&D centres across the world, Perstorp is a speciality chemicals firm that produces sustainable solutions. It operates in 26 countries across the globe, including the United States, Europe, and Asia Pacific. Perstorp made €1.33 billion in revenue and €248 million in ebitda in FY2021, with an ebitda margin of 18.6%.

Buy call

AmBank Research says it is reiterating the BUY call on Petronas Chemicals Group (PChem).

“We reiterate our BUY call on Petronas Chemicals Group (PChem) with a higher fair value of RM11.10 (from an earlier RM10.90/share), pegged to a rolled-forward FY23F EV/EBITDA of 8x and a premium of 3% for our ESG rating of 4 stars.

“This is at parity to PChem’s 2-year EV/EBITDA average against the backdrop of elevated oil prices trading at US$100/barrel currently.

“We have also raised FY23F–FY24F earnings by 8%–9% to account for the value-accretive contribution from the group’s proposed acquisition of the entire equity interest in niche specialty chemicals group, Perstorp Holding AB, a sustainability-focused global specialty chemicals company, for €1.54bil (RM7bil or 9% of PChem’s market cap) cash from Financière Forêt S.à.r.l, a company under European private equity firm, PAI Partners,” it says.

Based on 1QFY22 results and assuming European interest costs of 2%, we are projecting a higher 9% increase to its prospective earnings vs. PChem’s Bursa Malaysia announcement illustration of a 4% EPS rise based on FY21 historic results.

The analyst firm says it is positive on this development, which will strengthen PChem’s basic petrochemicals portfolio and accelerate its expansion into higher margin derivatives, specialty chemicals and solutions.

“All in, we remain bullish on PChem’s earnings prospects given the strong correlation to its share price as firmer naphtha costs will support petrochemical product prices.”

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