PTTCH stake in Cognis to add value - KimEng, KGI

25 July 2008 13:33  [Source: ICIS news]

SINGAPORE (ICIS news)--PTT Chemicals’ recent 50% acquisition of Cognis Oleochemicals will add value to the company, improve earnings and give PTTCH an international presence, said analysts from Kim Eng and KGI Securities on Friday.

“We expect this acquisition to raise PTTCH’s bottom line by around Baht (Bt) 500m-700m ($14.9m-20.9m) per annum depending on the oleochemical margin spreads each year,” said Kitichan Sirisukarcha, an analyst with Kim Eng Securities.

The earnings of Cognis Oleochemicals would add around Bt 174m to PTTCH’s fourth-quarter earnings, he added.

PTTCH was expected to benefit from expanded growth in product lines and would be able to create more value add in the oleochemical business and derivatives, which are natural-based products with stable demand.

“An international market presence coupled with a strengthened oleochemical feedstock position would be created for PTTCH through Corgis’ global marketing channels and co-operation with [Malaysia's] Sime Darby, the world’s largest crude palm oil producer”, Sirisukarcha said.

In addition, diversification will be achieved through the acquisition which would in turn enhance competitiveness and stabilise revenue growth, he said adding that the price did not look expensive.

On a bleaker note, KGI securities has highlighted its concerns on PTTCH’s earnings considering the current upward pressures on gas feedstock costs despite concurring largely with Kim Eng’s take on the company’s future financial performance.

“If the total cost of gas increases between 10% to 30%, the earnings forecast for PTTCH will decline between 6.5% and 19.5% in 2008”, KGI said in its sensitivity analysis report, adding that they remain positive on the acquisition.

Kim Eng and KGI has predicted PTTCH’s full-year net profits to be Bt 16.8bn and Bt 14.2bn respectively.

($1 = Bt33.45)

For more on oleochemicals visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: Bohan Loh
+65 6780 4359

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly