Lotte Titan Chemical

Re: Lotte Titan Chemical

Postby winston » Thu Apr 30, 2020 1:10 pm

not vested

Lotte Chemical Titan (TTNP MK)

Share Price: MYR1.54
Target Price: MYR1.85
Recommendation: Buy

Worst is over

We upgrade LCT to BUY (from SELL):
(i) Share price has already priced-in the 1Q20 losses with share price fallen 36% YTD;
(ii) LCT could turn profitable again from 2Q on sequentially higher sales volume and higher spread;
(iii) Stock trades at crisis valuation of 0.3x P/BV (-1.8 SD to mean) but outlook has turn positive for LCT.

We cut our FY20E EPS by 87% but maintain FY21-22E.

Our new TP is MYR1.85 (+9%) as we peg the stock at 0.36x 2020 P/BV (-1.5 SD to mean).

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... f72a55.pdf
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Re: Lotte Titan Chemical

Postby winston » Thu Apr 30, 2020 2:31 pm

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Lotte Chemical Titan to gain from crude oil price collapse — TA Securities

by Lai Ying Yi

KUALA LUMPUR (April 30): Lotte Chemical Titan Holding Bhd (LCT) is expected to benefit from lower naphtha feedstock cost following the collapse in crude oil prices, according to TA Securities Holdings Bhd.

TA analyst Kylie Chan Sze Zan wrote in a note today LCT’s plant utilisation rates are also expected to recover following the completion of statutory plant turnarounds this month.

"However, this may not translate into a profit turnaround given potential weakness in ASPs (average selling prices) and sales volumes. The latter is underpinned by demand destruction caused by Covid-19 lockdowns and an economic recession.

We slashed ASPs by 10% across the board and reduced sales volume assumptions by 15% for FY20 (financial year ending Dec 31, 2020). As a result, our earnings forecasts are slashed by 118%/28%28% [for FY20, FY21 and FY22 respectively],” Chan said.

Chan said TA arrived at a new target price for LCT shares of RM1.64 versus RM1.20 previously.

TA’s note today followed LCT’s financial results announcement yesterday for the first quarter ended March 31, 2020 (1QFY20).

In a filing with Bursa Malaysia yesterday, LCT posted a net loss of RM170.06 million for 1QFY20, compared to a net profit of RM55.83 million a year earlier.

LCT said 1QFY20 revenue fell to RM1.46 billion from RM2.17 billion.

Chan said today LCT’s 1QFY20 core net loss of RM218 million underperformed expectations.

"The results were below our previous full-year profit forecast of RM259 million (consensus: RM184 million). The variance was due to lower-than-expected sales volumes and product ASPs. This was exacerbated by large write-downs of inventories to net realisable value,” the analyst said.

On Bursa today, LCT’s share price had risen 18 sen or 11.69% to RM1.72 at 11.15am, valuing the company at RM3.9 billion.

Its latest reported net asset per share stood at RM5.41.

Crude oil prices have fallen to below US$20 (RM86.44) a barrel on oversupply concerns and as the commodity contends with demand destruction due to the Covid-19 pandemic.

Today, it was reported that West Texas Intermediate (WTI) crude futures were traded at US$16.14 at 0147 GMT, while Brent was transacted at US$23.42.

Source: The Edge

https://www.theedgemarkets.com/article/ ... securities
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Re: Lotte Titan Chemical

Postby winston » Sun May 03, 2020 8:39 am

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Analysts have mixed views on Lotte Chemicals

By INTAN FARHANA ZAINUL

NORMALLY, cash-rich companies with low borrowings are highly sought after by investors.

That, however, does not necessarily seem to be the case with Lotte Chemical Titan Holdings Bhd (LCT). Although it is sitting on RM4bil cash with zero gearing, the cash position was due to underutilisation of the proceeds it raised from its initial public offering (IPO) back in 2017.

Listed at RM6.59 per share in July 2017, the stock has been on a downtrend since then to hit a low RM1.15 on March 20,2020.

However, in recent weeks, the stock has climbed by almost 50% to close at RM1.70 on Thursday.

Maybank IB Research recently upgraded LCT to a “buy”, giving the stock a target price of RM1.85 per share.

Despite its billion ringgit sales, LCT is trading at a single-digit price-earnings (PE) ratio of 8.8 times.

LCT earnings have been lumpy as the company is mainly in the commodity business, which is driven by economic swings.

The company, when announcing its first quarter results last week, said it will be impacted by the economic slowdown due to the coronavirus pandemic.

Interestingly, during the movement control order (MCO), which started on March 18, LCT said its operations continued as it is deemed an essential service.

LCT provides vital raw materials to the plastic packaging and healthcare sector.

LCT is in the business of petrochemicals which are converted into products like plastic, gels, paint and fertilisers.

For the first quarter ended March 30, the company posted RM170mil in losses compared with a loss of RM55.83mil a year earlier. This was due to lower average selling prices, expensive raw materials, a decline in sales and writedowns in inventories.

LCT’s revenue for the quarter dropped by 2.63% to RM1.46bil from RM2.17bil previously.

However, many equity analysts are bullish on the company’s prospects due to the collapse in global crude oil prices, which brings down LCT’s raw material costs. Maybank IB Research expects that the worst is over for LCT and that the company could turn profitable in the second quarter stemming from demand recovery in May and June.

Despite giving a “buy” recommendation on LCT, the research house cut its earnings forecast on LCT’s financial year 2020 by 87% to include losses in the first quarter, and lower sales and profit from its associate in the US.

However, the research house believes the market has already priced-in LCT’s first quarter loss, with the stock having lost around a third of its value, year-to-date.

Meanwhile, CGS-CIMB Research said the losses in the first quarter were higher than its earlier forecast due to LCT’s plant turnaround activities.

CGS-CIMB reckons that with the recent sharp drop in naphtha prices, which is LCT’s main feedstock, the company would see a better result in the second quarter.

The research house also has a “buy” call on LCT but expects sales to drop by 21% this year.

According to Bloomberg data, four analysts are recommending a “buy” on LCT, one suggests “hold” while another three have a “sell” on LCT.

TA Research, which has a “sell” call, says that lower naphtha feedstock costs may not translate to a profit turnaround given the potential weakness in average selling prices and sales volumes. The research house has cut its earnings forecast for LCT by 118% for this year and expects the company to record losses of RM47.3mil for the year.

Delay in Indonesia project

In 2017, LCT went into the public market to raise money to finance its expansion in Indonesia among others. The group had planned to use IPO proceeds to fund the development of an RM18bil integrated petrochemical facility in Indonesia.

On Wednesday, LCT hinted that the project’s commissioning date may be delayed as a result of the current global oversupply situation.

The company had targeted to start construction in the later part of 2020 with hopes to complete the project by 2023.

Last year, LCT sold a 49% stake in the Indonesian petrochemical facility to its major shareholder Lotte Chemical Corp (LCC) for RM3.6bil.

While the partnership is a boon for LCT, the company would need to raise another RM11bil to fund the project that may be tough as some banks are shying away from oil and gas-related companies.

Notably when LCT was listed in 2017, it was initially planned to be priced at RM8 per share but that price was cut down to RM6.50, after the book building process. The floatation was also downsized by about 33% via a cut down in issuance to institutional investors after the price discovery process.

Since its IPO, LCT’s share price has been on a downward spiral. Looking at the current volatility in the market and slow down in economic activity, will LCT’s price ever recover to anywhere near its IPO price?

Source: The Star

https://www.thestar.com.my/business/bus ... s#cxrecs_s
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Re: Lotte Titan Chemical

Postby winston » Mon May 04, 2020 10:11 am

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2Q to see expansion in product spreads

1Q20 core net loss of RM140m was higher than our FY20F core net loss forecast of RM84m (consensus: RM184m) due to turnaround activities.

With the sharp drop in naphtha prices, product spreads have expanded so much that we upgrade from Reduce to Add as 2Q earnings should be good.

Our target price rises to RM1.97 upon the earnings upgrade, still based on EV/EBITDA of 4x, half the sector average due to its high earnings volatility.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 48796D33EB
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Re: Lotte Titan Chemical

Postby winston » Wed Oct 07, 2020 8:41 pm

not vested

Aug 2, 2020

Will still be profitable in 2H20; maintain HOLD

2Q20 core earnings rebounded sharply but 3Q20 earnings could be weaker QoQ in the absence of the substantial inventory write-back.

We maintain our FY20-22E EPS forecasts and expect a profitable 2H20 as the present spread is still healthy.

Our TP is retained at MYR2.10, which is based on an unchanged 2x FY21E EV/EBITDA (-1SD to 5Y mean).

Maintain HOLD for the near-term earnings could be unexciting, but the stock has deep value with its FY21E P/BV at 0.4x.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/1 ... a0e248.pdf
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