PetChem faces near-term headwinds, recovery likely in second half
KUALA LUMPUR: Petronas Chemicals Group Bhd's (PetChem) earnings are expected to remain subdued in the second quarter of financial year 2025 (2QFY25), with a significant recovery anticipated only in the second half of 2025 (2H25).
Urea and methanol prices, which had earlier contributed commendably to the group's performance, have eased going into 2Q25 as earlier supporting factors, including stronger feedstock prices and supply constraints, have gradually dissipated.
As such, Hong Leong Investment Bank Bhd (HLIB Research) expects the group's fertilisers and methanol segment to record softer earnings in the coming quarter.
The research house also expects the olefins and derivatives (O&D) division to remain under pressure in 2Q25, as ongoing feedstock disruptions at Petrochemicals Company Sdn Bhd (PPC) and utility supply issues in Kertih continue to weigh on the segment's profitability.
In addition, polyolefin prices are expected to trend lower, amid a potential demand slowdown triggered by the United States' sweeping tariffs and a recent decline in oil prices that has reduced naphtha feedstock costs.
"In light of the operational hiccups in Kertih and PPC, we expect PCG's bottom line to stay depressed in 2QFY25 and will only stage a meaningful recovery in 2H25," it noted.
HLIB Research has maintained a 'Sell' call on PetChem, with a lower target price of RM2.50.
The firm expects the petrochemical sector to remain challenging on the back of China's aggressive capacity expansion drive, coupled with unexciting demand outlook from the downstream sectors.
"Not helping is PCG's PPC operations, which contribute a substantially higher depreciation and interest cost base that is not covered by PPC's negative earnings before interest, tax, depreciation, and amortisation contribution, thus resulting in significant earnings dilution going forward," it said.
In line with this, HLIB Research has also lowered its FY25 and FY26 earnings forecasts by 38 per cent and six per cent, respectively, and introduced an FY27 forecast of RM1.8 billion.
PetChem recorded subdued 1Q25 core earnings of RM79 million which came in below HLIB Research's and street estimates at five per cent of FY25 forecasts.
Core earnings dropped 84 per cent year-on-year (YoY) as O&D business slipped into negative territory.
The earnings shortfall was attributed to extensive operational disruptions in the O&D segment, affecting both PPC and Kertih.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
4 days ago
- New Straits Times
Solarvest's Brunei project could generate RM100mil via JV, says HLIB
KUALA LUMPUR: The solar project secured by Solarvest Holdings Bhd in Brunei is expected to deliver up to RM100 million in value to its 49 per cent-owned joint venture, according to Hong Leong Investment Bank (HLIB Research). Solarvest secured a 25-year power purchase agreement (PPA) through its 34 per cent-owned joint venture (JV), Seri Suria Power (B) Sdn Bhd. The agreement, inked with Brunei's Department of Electrical Services, will see the JV build, own and operate a 30 MWac ground-mounted photovoltaic (PV) plant atop a remediated landfill in Kampong Belimbing, Kota Batu. Commercial operations are expected to begin by the end of the calendar year 2026, with construction scheduled to start in the third quarter of 2025. Seri Suria Power is a partnership between Solarvest and local entities Khazanah Satu Sdn Bhd — a Bruneian government investment arm under the Finance Ministry — and Serikandi Oilfield Services Sdn Bhd, an energy and infrastructure service provider. HLIB Research said in a note the engineering, procurement, construction, and commissioning (EPCC) scope is expected to deliver between RM80 million and RM100 million in value to Solarvest's 49 per cent-owned EPCC JV, expanding its existing RM1.2 billion order book. "Capital expenditure for the plant is projected at B$35 million (about RM116 million) and should have minimal balance sheet impact considering equity funding required from Solarvest amounts between RM7 million and RM10 million. "Meanwhile, our preliminary project internal rate of return estimation could come in the 'high single digit' range – a reasonable figure, in our view," the firm said. HLIB Research added Solarvest's management aims to grow its order book beyond RM2 billion in the financial year ending March 2026 (FY26), supported by domestic clean energy initiatives such as LSS5, MyBeST, LSS6 and the CRESS programme. The group's tender pipeline remains robust at 5.86 gigawatt-peak (GWp), with battery energy storage systems (BESS) also emerging as a key growth area. HLIB Research maintains a "Buy" rating on Solarvest with an unchanged target price of RM2.25, based on a sum-of-parts valuation comprising a 25 times price-to-earnings multiple for its EPCC business and discounted cash flow for its recurring income assets. Key risks to the outlook include execution delays, political uncertainties and potential fluctuations in material and labour costs.
Barnama
4 days ago
- Barnama
Top News Headlines In Indonesia, Laos, Myanmar, Singapore & Vietnam: June 17, 2025
Indonesian officials and activists have pushed back against recent remarks by Culture Minister Fadli Zon suggesting the mass rapes during the May 1998 riots were merely 'rumors', saying such comments risk erasing painful historical truths and marginalising victims. The government currently sees no need to send another delegation to the United States for the negotiations on tariffs as it believes it has made its case for open bilateral trade and says the ball is now in the US' court. 2. RI SEES NO NEED TO SEND TEAM FOR US TRADE TALKS -- THE JAKARTA POST The Lao media industry has undergone a rapid transformation, from analogue to digital broadcasting. Online media platforms have changed the way content is disseminated and consumed among the public. Laos has 86 radio stations, 49 television stations and 116 print media outlets. 2. HARNESSING PRIVATE INVESTMENT FOR GROWTH -- VIENTIANE TIMES The International Finance Corporation and the government is working to enhance the Public-Private Partnerships legal framework to make the business environment attractive. This will help in welcoming private sector investment to promote sustainable economic growth and job creation. MYANMAR 1. APRIL-MAY FISH EXPORTS HIT RM200 MILLION -- THE GLOBAL NEW LIGHT OF MYANMAR About 43,600 metric tonnes of fish worth RM200 million (US$48 million) were exported in April-May this year. Myanmar earned over RM1.8 billion (U$421 million) from about 400,000 metric tonnes of fish exports in the 2024-2025 financial year. 2. MODERNISING FOOTWEAR PRODUCTION FOR EXPORTS -- THE GLOBAL NEW LIGHT OF MYANMAR Myanmar's footwear manufacturers are striving to transform the sector into an export-oriented business. Producers are exploring modernising production, expanding domestic and foreign markets and utilising local raw materials. Nearly 85 per cent of inputs are locally produced. SINGAPORE 1. SINGAPORE AIMS TO RAMP UP AUTONOMOUS VEHICLE USE TO BOOST PUBLIC TRANSPORT NETWORK -- THE STRAITS TIMES Singapore is poised to make a big push for self-driving vehicles to be deployed across the island in the next five years, to strengthen the public transport network. 2. SINGAPORE TO HAVE 'MANY' AUTONOMOUS VEHICLES IN FIVE YEARS: ACTING TRANSPORT MINISTER JEFFREY SIOW -- CNA Singaporeans can expect to see "many" autonomous vehicles (AVs) on the roads in five years, said Acting Transport Minister Jeffrey Siow. VIETNAM 1. DRIVING TOWARDS ZERO EMISSIONS ON ROADS BY 2050 -- VIETNAM NEWS A new draft regulation on car emissions standards has been introduced by the government to reduce carbon pollution and achieve net zero emissions by 2050. The goal is for clean fuel distribution to achieve the nation's environmental goals. 2. ANIMAL VACCINATION YET TO MEET NATIONAL TARGET -- VIETNAM NEWS Animal disease vaccination funded by the state budget fell short in the first half of this year. Vaccination coverage for African swine fever, avian influenza and foot-and-mouth disease failed to reach the mandated national targets. -- BERNAMA BERNAMA provides up-to-date authentic and comprehensive news and information which are disseminated via BERNAMA Wires; BERNAMA TV on Astro 502, unifi TV 631 and MYTV 121 channels and BERNAMA Radio on FM93.9 (Klang Valley), FM107.5 (Johor Bahru), FM107.9 (Kota Kinabalu) and FM100.9 (Kuching) frequencies. Follow us on social media : Facebook : @bernamaofficial, @bernamatv, @bernamaradio Twitter : @ @BernamaTV, @bernamaradio Instagram : @bernamaofficial, @bernamatvofficial, @bernamaradioofficial TikTok : @bernamaofficial
New Straits Times
5 days ago
- New Straits Times
OCBC extends RM351mil financing for projects in Johor-Singapore SEZ
KUALA LUMPUR: OCBC Bank (Malaysia) Bhd has approved RM351 million in financing for three major real estate developments within the Johor-Singapore Special Economic Zone (JS-SEZ). The funding supports a joint venture between property developers See Hong Chen Group and EXSIM Group for the acquisition of freehold land in Johor Bahru. In a statement today, the bank said the mixed-use development has a projected gross development value of RM1.8 billion. OCBC is also financing See Hong Chen Group's purchase of additional freehold land parcels in Bandar Johor Bahru. "The JS-SEZ represents a significant opportunity for long-term economic growth," said OCBC managing director and wholesale banking head Jeffrey Teoh. "We're committed to going beyond traditional lending by delivering integrated financial solutions through our One Group capabilities," he added. The JS-SEZ, a flagship cross-border economic initiative, is expected to catalyse investment flows between Johor and Singapore, with connectivity boosted by the Rapid Transit System Link, which is slated for completion in 2026. See Hong Chen Group managing director See Cherng Jye said the developments aligned with the group's strategy to deliver impactful assets in growth zones. "This collaboration marks a significant milestone for us as we expand our footprint into Johor," said EXSIM managing director Lim Aik Hoe, adding that the projects are designed to meet evolving market and community needs. OCBC is the second-largest banking group by assets in Southeast Asia and is part of a wider financial ecosystem that includes Great Eastern, Bank of Singapore and asset manager Lion Global Investors.
