4Q21: Capping off a record breaking year
A strong (but expected) quarter; maintain BUY
PCHEM’s 12MFY21 results were its best since listing, as 4Q21 results came in in-line with ours but above consensus estimates. With a firm near-to-mid-term ASP outlook, we maintain our BUY call but raise our FY22-23E estimates by 7%/8%, and roll-forward our base year to FY23 (we have also introduced FY24E). Our new TP is MYR11.00 (+5%), pegged to an unchanged 9x FY23E EV/EBITDA (LT mean). With a strong balance sheet (net cash of MYR1.75 per share, end-3Q21: MYR1.58) and attractive FY22-23E dividend
yields of c.4%, PCHEM remains our top pick in the MY petrochemical space.
A third consecutive quarterly PATMI record
Excluding EIs of MYR19m, 4Q21 core PATMI of MYR2.04b (+192% YoY, +5% QoQ) was PCHEM’s third consecutive quarterly record as 12MFY21 core NP surged to MYR7.21b, coming in at 100%/110% of ours/the street’s full-year estimates. A 23 sen interim dividend was declared, taking FY21 dividends
to 56 sen (payout ratio: 61%). The performance was esp. commendable given blended plant utilisation averaged just 89%, vs 3Q21/4Q20’s 94%.
Lower tax and JV contributions boost bottom-line
4Q21 key highlights: (i) Revenue grew by 82%/21% YoY/QoQ to MYR7.0b, on the back of firm O&D and exceptionally strong F&M ASPs (+93%/28% YoY/QoQ on a blended basis); (ii) EBITDA margins were sequentially lower (-3.3% QoQ) as feedstock cost pressures weighed on the O&D segment, in line with higher prices for crude derivative; (iii) increased F&M sales (+119%/44% YoY/QoQ) via Labuan entities incurred lower taxation – the eff. tax rate for 4Q21/FY21 was just 5% (substantially lower than the 5Y
avg of 15%); and (iv) Assoc. contributions of MYR728m in FY21 (vs FY19/20 loss of MYR54m/84m) was a positive PBT boost, underpinned by its 60:40 BASF JV’s exceptional performance in the specialty chemical space.
Revising estimates in light of firm ASP outlook
We have revised our FY22-23E estimates to impute for: (i) a lower eff. tax rate of 10% (vs. 15% previously), (ii) improved contributions from assocs. and JVs (+MYR100-150m), and (iii) raised feedstock cost (+19%)/blended ASP (+25%) assumptions to reflect the higher expected cost of crude in FY22 (MIBG assumption: USD80/bbl). As border reopenings gather pace, the ongoing Ukraine crisis could provide further tailwinds to already strong O&D/F&M ASPs, should O&G prices remain elevated throughout 1H22. BUY.