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16 Sep 2020 / 22:38 H.

Oxyalkylates venture positive for Petronas Chemicals’ long-term prospects: AmInvestment

PETALING JAYA: Petronas Chemicals Group Bhd’s (PetChem) plan to buy 50% of PCC Oxyalkylates Malaysia Sdn Bhd for an undisclosed sum from PCC SE indicates management’s confidence in the growth in demand for specialty chemicals in the region.

PCC Oxyalkylates is building an oxyalkylate facility within the Kertih Integrated Petrochemical Complex, Terengganu to produce ethoxylates and polyether polyols. Ethoxylates are used to produce detergent, home care and personal care products while polyether polyols are used in foam mattresses and upholstery applications.

In a note, AmInvestment Research said it is positive on the group’s longer term prospects, estimating a 10% return on investment will translate to a substantive 6% of FY20F earnings.

“While the announcement did not reveal the specific capex for this plant, we understand that it could already be included in the total capex allocation of US$200-250 million (RM834 million-RM1 billion), as guided by management during the 2QFY20 analyst briefing,” it said.

“This capex is expected to be spent over three years for three new specialty chemical projects – a silicone blending plant in Gebeng, a butadiene derivative facility in Pengerang Integrated Complex, and the Kertih operations. We have not incorporated any contributions from these investments yet as the commencement dates lie beyond our current projections.”

In the near term, however, the research house said the group’s FY20F plant utilisation rate (PU) is expected to be in the mid-90% level as the deferral of turnaround activities for Gebeng plant in Q1’20 to Q4’20 could slightly moderate PetChem’s operations.

For FY21F, the group still expects PU levels of over 90% with four minor turnaround activities scheduled for methanol plants in Labuan and Gebeng as well as Asean Bintulu Fertilizer and Petronas Fertilizer Kedah.

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