03-Aug-2017
Advanced Petrochemical - 2Q17 results conference call takeaways
Rating: Buy
Target Price: SAR53.0
Closing Price: SAR43.9
Advanced Petrochemical hosted its 2Q17 results conference call yesterday with Abdullah Al Garawi (CEO) and Mohammad Al Qahtani (finance manager). Please see the key points below. For a more detailed summary, please see page 3.
Volumes jump 15% Q-o-Q following shutdown
- Better volumes (155k tonnes, +15% Q-o-Q) and spreads drove the stronger sequential numbers in 2Q.
- Shutdown in 1Q was to improve catalyst, which was three years old and had started to negatively impact yields.
- Management still believe they can improve operations further; looking at further enhancements during next shutdown.
Some concerns on margins moving into 2H17
- Spreads YTD have been reasonable, but the recent upward move in propane prices will pressure spreads (impact won’t be seen till September due to typical lag).
- Mgmt. doesn’t believe propane prices will sustain at this elevated level, especially as demand is seasonally weak in summer.
Growth opportunities in KSA limited, but some opportunities under evaluation
- Growth opportunities in KSA are limited due to feedstock constraints, so looking at downstream or international investments.
- Evaluated several projects already, but didn’t meet board’s criteria so they were shelved.
- Not looking to expand outside petchems. Currently evaluating a couple of projects including a potential downstream PP plant at the Korean JV as well as another potential investment. Mgmt hope to have an update on these projects before end of year.
Not planning to sell down Tasnee in ST; looking at participating in next BoD meeting
- Mgmt. have no plans to sell Tasnee down even if price rallies substantially; they view it as long-term strategic investment.
- Mgmt. looking to participate in Tasnee’s next BoD meeting to get a closer look and try to add value.
Not yet clear if sukuk will be rolled over, but dividends not at risk
- No definitive plan in place for SAR1bn sukuk due in 2019, could be rolled over or partially rolled over.
- The CEO noted regardless of what they do with the sukuk, dividends will not be impacted.
Yousef Husseini
Target Price: SAR53.0
Closing Price: SAR43.9
Advanced Petrochemical hosted its 2Q17 results conference call yesterday with Abdullah Al Garawi (CEO) and Mohammad Al Qahtani (finance manager). Please see the key points below. For a more detailed summary, please see page 3.
Volumes jump 15% Q-o-Q following shutdown
- Better volumes (155k tonnes, +15% Q-o-Q) and spreads drove the stronger sequential numbers in 2Q.
- Shutdown in 1Q was to improve catalyst, which was three years old and had started to negatively impact yields.
- Management still believe they can improve operations further; looking at further enhancements during next shutdown.
Some concerns on margins moving into 2H17
- Spreads YTD have been reasonable, but the recent upward move in propane prices will pressure spreads (impact won’t be seen till September due to typical lag).
- Mgmt. doesn’t believe propane prices will sustain at this elevated level, especially as demand is seasonally weak in summer.
Growth opportunities in KSA limited, but some opportunities under evaluation
- Growth opportunities in KSA are limited due to feedstock constraints, so looking at downstream or international investments.
- Evaluated several projects already, but didn’t meet board’s criteria so they were shelved.
- Not looking to expand outside petchems. Currently evaluating a couple of projects including a potential downstream PP plant at the Korean JV as well as another potential investment. Mgmt hope to have an update on these projects before end of year.
Not planning to sell down Tasnee in ST; looking at participating in next BoD meeting
- Mgmt. have no plans to sell Tasnee down even if price rallies substantially; they view it as long-term strategic investment.
- Mgmt. looking to participate in Tasnee’s next BoD meeting to get a closer look and try to add value.
Not yet clear if sukuk will be rolled over, but dividends not at risk
- No definitive plan in place for SAR1bn sukuk due in 2019, could be rolled over or partially rolled over.
- The CEO noted regardless of what they do with the sukuk, dividends will not be impacted.
Yousef Husseini