MALAYSIA’S BIGGEST IPO FLOP TAKES ANOTHER TUMBLE AFTER FIRE GUTS PLANT

KUALA LUMPUR: Lotte Chemical Titan Holding Bhd (LCTitan), Malaysia’s biggest initial public offer (IPO) flop, saw its share price slide on Thursday, after a fire damaged one of its factories in Johor.

Its share price fell to a low of RM5.04 in active trade on news about the fire at its plant in Pasir Gudang.

However, its share managed to rebound and was trading flat at RM5.29 near midday as analysts said the fire would have a minor impact.

LCTitan is an integrated producer of olefin (i.e. ethylene, propylene and other derivatives such as butadiene, TBA benzene and toluene) and polyolefin (i.e. polyethylene and polypropylene) operating in Malaysia and Indonesia, using oil-based naphtha as its feedstock.

LCTitan later announced to Bursa Malaysia a small fire broke out at the site of its TE3 project which was to be attached to its existing second naphtha cracker plant in Pasir Gudang at about 2.23pm.

“The fire was put out at about 2:41pm. We are still in the midst of investigating the cause of the fire.

No one was injured in the incident and all other plants at the Pasir Gudang site were not affected. There is no impact on normal production and all other plants are running normally,” it said.

LCTitan said there was minor damage and it expects the TE3 Project commercial startup to be on track by the fourth quarter of 2017.

Ahead of its listing, Lotte Chemical’s IPO was repriced at RM6.50 from RM8 initially due to tepid investor response. The company had also reduced the size of its IPO by one-fifth to 580 million shares.

Maybank Investment Bank Research said the fire was put out within 10 minutes and there were no injuries or fatalities.

“The impact is likely minor, in our view, as it involves an isolated production line and the major operations are unaffected,” the research house said.

“Assuming worst case scenario, product volume could be 3% lower than our base forecast and impact the earnings by a similar quantum,” it added.

Maybank said the risk-reward remained attractive despite this incident and maintained its “buy” call on LCTItan with a target price of RM7.85 (pegged to global peer average 2017 EV/EBITDA of 8.2x).

The management is expected to make an announcement later today detailing the incident and the impact to operations.

Based on Maybank’s channel checks, the plant that caught fire was TE3 and none of the other plants were affected. TE3 is a new plant which is undergoing commissioning process ahead of its planned start-up in October.

Maybank Investment Bank Research said the fire was put out within 10 minutes and there were no injuries or fatalities.

“The impact is likely minor, in our view, as it involves an isolated production line and the major operations are unaffected,” the research house said.

“Assuming worst case scenario, product volume could be 3% lower than our base forecast and impact the earnings by a similar quantum,” it added.

Maybank said the risk-reward remained attractive despite this incident and maintained its “buy” call on LCTItan with a target price of RM7.85 (pegged to global peer average 2017 EV/EBITDA of 8.2x).

The management is expected to make an announcement later today detailing the incident and the impact to operations.

Based on Maybank’s channel checks, the plant that caught fire was TE3 and none of the other plants were affected. TE3 is a new plant which is undergoing commissioning process ahead of its planned start-up in October.

ANN

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