KUALA LUMPUR (Jan 31): CIMB IB Research has upgraded Lotte Titan Chemical Holding Bhd (LCT) to “Add” at RM4.24 with a higher target price of RM4.70 (from RM4.13) and said LCT’s FY18 core net profit of RM817 million was 10% below Bloomberg consensus but 18% ahead of house overly-conservative forecast of RM694 million.
In a note today, the research house said the share price fell 8% yesterday after the results, opening up a trading opportunity as CIMB projects sequential improvement from the weak 4Q18.
CIMB Research said it has cut its FY19F core EPS forecast for LCT by 21% as it expects the lingering effects of the weak demand in China and the influx of US polyethylene exports into Southeast Asia to keep selling-price-to-naphtha-cost spreads weaker than originally expected.
“Meanwhile, the upcoming commissioning of Petronas Chemicals’s Pengerang plants from 1Q19F onwards may compress LCT’s selling prices as well.
“Consequently, our EV/EBITDA target multiple is cut from 5x to 4x, 30% lower than the sector average,” it said.
At 9.06am, LCT dipped 1.42% or 6 sen to RM4.18 with 134,900 shares traded.