Petronas reveals units to be listed

Friday April 9, 2010

By JAGDEV SINGH SIDHU

Its petrochemical business and MMHE picked for year-end listing

jagdev@thestar.com.my
KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) named its petrochemical business and Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) as the two companies it will list on Bursa Malaysia by year-end.

“Like our other listed subsidiaries, these two new listings will allow the investing public to participate directly in some of Petronas’ businesses – in this case, our petrochemical and heavy engineering businesses,” said president and CEO Datuk Shamsul Azhar Abbas in a statement yesterday.

“We hope that these listings will add further depth to Bursa Malaysia.”
Petronas said its petrochemical business registered revenue of RM13bil for the year ended March 31, 2009. The business consists of a diverse product portfolio that ranges from olefins and polyolefins, fertilisers, industrial to speciality chemicals.

The business started with a capacity of 600,000 tonnes per year and had since grown to over 10 million tonnes of petrochemical products, with a significant regional market presence, said Petronas.

“Petronas’ petrochemical business takes pride in its operational excellence, having achieved world-class standards in manufacturing. The commencement of commercial operations of the mega methanol plant in Labuan in May 2009, with a world-scale capacity of 1.7 million tonnes per year, further strengthens its position as the biggest methanol producer in Asia-Pacific and fourth globally,’’ it said.

MISC Bhd subsidiary MMHE, which Petronas said is the country’s largest marine and heavy engineering entity, registered revenue of over RM4bil for the financial year ended March 31, 2009.

“MMHE’s performance is driven by three core businesses: engineering and construction services, marine conversion, and marine repair,’’ said Petronas.

“MMHE has grown to become an integrated engineering, procurement and construction contractor and liquefied natural gas tanker repair specialist with in-house capabilities and is committed to the pursuit of growth in strategic areas and enhancement of capability through investments in infrastructure, technology and human capital.”

Petronas said MMHE operated a yard in Pasir Gudang, Johor, which is one of the largest in the region and the only one capable of undertaking floating production storage and offloading and floating storage offloading conversions and fabrication of high tonnage offshore oil and gas structures in Malaysia.

The listing of two Petronas subsidiaires was announced by the Prime Minister at Invest Malaysia 2010.

Petronas’ other listed subsidiaries are Petronas Dagangan Bhd, Petronas Gas Bhd, KLCC Property Holdings Bhd and MISC.

The announcement yesterday drew little praise from analysts, but between the two companies, analysts said MMHE could be more appealing to investors given that the company would be contract driven and directly dependent on the oil and gas business cycle.
“There’s good growth in fabrication and the expectation is that revenue will grow strongly as the oil and gas exploration business is picking up,’’ said Maybank Investment Bank Bhd head of research Andrew Lee.

The downside, however, is that MMHE is already part of MISC and while the move will unlock value, it might not be assigned a higher market price to earnings ratio than its current parent.
Analysts said Petronas’ petrochemical business had a large revenue base but it might not be a favoured choice due to the nature of its business.
“Because of volatility and its cyclical nature, the price-earnings ratio will be low,’’ said OSK Research head Chris Eng.

UOB Kay Hian head of research Vincent Khoo said margins in the petrochemical business were low but that, however, depended on the business cycle.
He said the listings would be positive but it would not change the landscape of Bursa Malaysia.

Another issue analysts would be watching out for would be the free float of those two stocks on Bursa. The general complaint has been that the free float of some of the largest stocks on the stock exchange is low which tends to lead to thin trading volumes.