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The recent happening in the oil and gas situation in Malaysia had definitely throw an ultimatum to Petronas in searching for asset to replace the potential revenue and profit losses from the handover of Sarawak oil and gas business.
This is one of the political promises to honor MA63 agreement.
While it will be a good progress for Sarawak, but Petronas being one of the major revenue and income for Malaysia, it is important to seek for other asset to replace loss of revenue and profit.
LCTITAN main business activities are producing chemical product from refined oil and gas material. Lotte Chemical Titan Holding Berhad (LCT) is a Malaysia-based investment holding company, which manages LCT Group. The Group, comprising the Company and its subsidiary, is an integrated petrochemical producer with two principal product categories: Polyolefins, consisting of polyethylene (PE) and polypropylene (PP), and Olefins, including ethylene and propylene, together with other derivatives, such as butadiene, tertiary butyl alcohol (TBA), benzene and toluene. The Company's products are mainly distributed to plastic fabricators and trading houses in both domestic and export markets, such as China, South Korea, Indonesia and other Southeast Asian countries, as well as various European countries. Other business activities of the Group include investment holding and the manufacture of synthetic rubber. Lotte Chemical Titan Holding Berhad's subsidiaries include Lotte Chemical Titan (M) Sdn Bhd, Lotte Chemical Titan Trading Sdn Bhd and Lotte Chemical Titan Corporation Sdn Bhd.
The recent profit margin squeeze had placed a difficult position in LCTITAN to be profitable as factory utilization rate still hang around 60 to 65%. This had caused LCTITAN continuous losses for 9 quarters, forcing the owner to look into selling the whole Malaysia LCTITAN unit and focus on higher margin business - battery material
One of the reason LCTITAN cannot be profitable is due to LCTITAN do not have refinery business. Unlike Petronas Pengerang Integrated Complex, the upstream downstream refinery until end product can provide the company a strong top to bottom approach in operational profitability.
LCTITAN FOR SALE
News of LCTITAN looking to sell is circulating in the market for quite some moment. However, as the industry is very niche and specialize, there are not much buyer in the market. For the case of Malaysia, it will probably only be Petronas Chemical Group.
Petronas probably had saw the potential of oil and gas business handling back to Sarawak state control Petros, and had formulated a move to diverse out from upstream operation into downstream, with focus on specialty chemical.
Petronas Chemical had bought over BASF PETRONAS JV factory plant in Gebeng Kuantan in 2021.
The most recent will be PERSTORP HOLDING AB from Sweden in 2022.
However, the vacuum of RM 100 billion revenue loss is very big, and potentially can see Petronas going to seek more M&A to boost back the revenue and profit.
An opportunity to acquire LCTITAN is very much a big potential and a deal both parties are looking at, LCTITAN being eager to sell, and Petronas being eager to expand into Chemical.
As an investor, I need to inform my reader that I am invested into LCTITAN due to it's attractiveness in potential coming sale, current share price RM 1.02 being just 21% of the NTA RM 4.99. LCTITAN unit also will be able to produce toluene for future MCH transportation which will be profitable.
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IMPORTANT NOTICE
Please be informed that I am not a professional or certified analyst. I am not a licensed consultant, just a normal retail investor. I am just sharing my ideas and opinion on the market outlook. Any company mentioned should not be interpreted as a buy/sell/trade call. Please do your own research and buy/sell/trade at your own risk.
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