No major impact from fire at Lotte Chemical Titan's Pasir Gudang plant expected

PETALING JAYA:Maybank IB Research does not foresee a significant impact from the fire at Lotte Chemical Titan Holding Bhd’s plant in Pasir Gudang as it could easily scale back the schedule by one to three months.

The research house noted that the impact is likely minor as it involves an isolated production line and the major operations are unaffected.

“Assuming the worst case scenario of a three-months delay, the plant will only commence operations in January 2018. This will cut product volumes by 3% against our 2017 base forecast,” it said in a research note today.

Lotte Chemical Titan told Bursa Malaysia that no one was injured in the incident and all other plants at the Pasir Gudang site were not affected. It is currently assessing the financial impact on the company and will make an immediate announcement once determined.

“There is minor damage and we expect the TE3 project commercial startup to be on track by Q4 2017. We will provide an update on the TE3 project as soon as possible,” the olefin and polyolefin producer noted.

TE3 is a new plant which is undergoing commissioning process ahead of its planned start-up in October. It has a nameplate capacity of 354 kilo tonnes per annum (KTA) to lift the group’s total capacity to 3,368KTA by year-end.
“This fire will likely delay the start-up process as the management and authorities will carry out their investigation,” said Maybank IB Research.

Citing risk-reward remains attractive, Maybank IB Research has maintained its “buy” recommendation on Lotte Chemical Titan with a target price of RM7.85.

“We recommend investors to look past this incident and remain ‘buyers’ of Lotte. Incident during commissioning and start-up phase is unfortunately frequent, but petrochemical companies will always get things to work like the way it should.”

The research house is confident the group will be able to resolve this issue within the year and its 2018 earnings forecast remains intact.

Lotte Chemical Titan shares fell four sen to close at RM5.25 today, with 11 million traded.