Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Equity Capital Markets

Lotte Chemical Titan Holding Berhad / Equity Capital Markets

My estimate for Titan's FY17 EBITDA is ₩600bil and I'd give 8x EBITDA multiple. So, I get ₩4.8tril price tag for Titan, which is slightly lower than the lower end (₩4.966tril) of its IPO indicative price band. Well, I admit that, even with my valuation approach, it'd be hard to make a case that we should subscribe to Titan IPO shares at prices higher than RM7.6. So, I can't really recommend buying this at much higher prices than the lower end of the indicative price band. However, given its future with the Indonesian NCC plant and weak naphtha prices, I think it'd be hard to miss out on this IPO. Rather, if you believe we will continue to have weaker oil (naphtha) prices further down the road and more confidence in Titan's new NCC plant in Indonesia, then I think it wouldn't hurt much to be a little more aggressive and buy it at higher than RM7.6. But for now, I'd personally stay with the lower end. So, my recommendation is to buy it but not higher than RM7.6 unless you think otherwise.

My estimate for Titan's FY17 EBITDA is ₩600bil and I'd give 8x EBITDA multiple. So, I get ₩4.8tril price tag for Titan, which is slightly lower than the lower end (₩4.966tril) of its IPO indicative price band. Well, I admit that, even with my valuation approach, it'd be hard to make a case that we should subscribe to Titan IPO shares at prices higher than RM7.6. So, I can't really recommend buying this at much higher prices than the lower end of the indicative price band. However, given its future with the Indonesian NCC plant and weak naphtha prices, I think it'd be hard to miss out on this IPO. Rather, if you believe we will continue to have weaker oil (naphtha) prices further down the road and more confidence in Titan's new NCC plant in Indonesia, then I think it wouldn't hurt much to be a little more aggressive and buy it at higher than RM7.6. But for now, I'd personally stay with the lower end. So, my recommendation is to buy it but not higher than RM7.6 unless you think otherwise.

Lotte Chemical Titan IPO - More Valuation Debate

Below is a sensitivity analysis for Titan's valuation. Titan's proposed RM8 based MC ₩5,182bil seems to be standing at about 30% discount to the valuation level that Petronas was getting last year. Petronas' production capacity is about 50% larger than that of Titan (in terms of ethylene). And more importantly, Petronas produces ethylene based on ethane, whereas Titan produces ethylene based on naphtha. This means Petronas has a structurally and inherently better cost structure. So, it is certainly imperative to apply a certain degree of discount to Petronas' valuation. How much would this discount be? Apparently, Titan is hoping to set this discount at 30%.

Below is a sensitivity analysis for Titan's valuation. Titan's proposed RM8 based MC ₩5,182bil seems to be standing at about 30% discount to the valuation level that Petronas was getting last year. Petronas' production capacity is about 50% larger than that of Titan (in terms of ethylene). And more importantly, Petronas produces ethylene based on ethane, whereas Titan produces ethylene based on naphtha. This means Petronas has a structurally and inherently better cost structure. So, it is certainly imperative to apply a certain degree of discount to Petronas' valuation. How much would this discount be? Apparently, Titan is hoping to set this discount at 30%.

Lotte Chemical Titan IPO - Valuation Sensitivity Analysis

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

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Equity Bottom-Up

Petronas Chemicals Group / Equity Bottom-Up

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Rising Malaysian exports, quickening GDP expansion, recovery in corporate earnings and a depressed MYR are spurring foreign interest in Malaysian equities
</li>
<li>
World economic growth is set to improve to 3.4 - 3.5% this year from 3.1% in 2016. A rising growth outlook in developed markets could drive strength in EM investing.
</li>
<li>
In April, the RHB economists upgraded Malaysia’s 2017 GDP growth forecast to 4.5% (2016: +4.2%) and export growth to 3.9% (2016: +0.1%).
</li>
<li>
The latest data points for March 2017 show…</li>
</ul>



Rising Malaysian exports, quickening GDP expansion, recovery in corporate earnings and a depressed MYR are spurring foreign interest in Malaysian equities


World economic growth is set to improve to 3.4 - 3.5% this year from 3.1% in 2016. A rising growth outlook in developed markets could drive strength in EM investing.


In April, the RHB economists upgraded Malaysia’s 2017 GDP growth forecast to 4.5% (2016: +4.2%) and export growth to 3.9% (2016: +0.1%).


The latest data points for March 2017 show…


Actionable Opportunities in Malaysia as Fundamentals Improve

<a href="https://www.smartkarma.com/entities/8757" target="_blank" data-smartkarma-citation="entities:8757:1">Lotte Chemical Corp (011170 KS)</a> disclosed the details of <a href="https://www.smartkarma.com/entities/24159" target="_blank" data-smartkarma-citation="entities:24159">Lotte Chemical Titan Holding Berhad (1512242D MK)</a>'s IPO in a regulatory filing. The first regulatory filing was posted on Apr 3, and the second regulatory filing containing additional information was posted on Apr 4.IPO Detail<ul>
<li>IPO bourse: Bursa Malaysia (Kuala Lumpur Stock Exchange)</li>
<li>Target date of IPO: 3Q 2017</li>
<li>IPO structure: New rights offering of up to 740,483,000 shares (30% of shares outstanding) with GreenShoe option of up to 55,537,000…</li>
</ul>

Lotte Chemical Corp (011170 KS) disclosed the details of Lotte Chemical Titan Holding Berhad (1512242D MK)'s IPO in a regulatory filing. The first regulatory filing was posted on Apr 3, and the second regulatory filing containing additional information was posted on Apr 4.IPO Detail
IPO bourse: Bursa Malaysia (Kuala Lumpur Stock Exchange)
Target date of IPO: 3Q 2017
IPO structure: New rights offering of up to 740,483,000 shares (30% of shares outstanding) with GreenShoe option of up to 55,537,000…


Lotte Chemical Titan's Malaysia IPO Detail from Regulatory Filing

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Thematic (Sector/Industry)

<ul>
<li>SGX lists four stocks mining industrial minerals including tantalite, phosphate, limestone and marble, four coal mining stocks and three gold mining stocks. These 11 stocks are at different stages in the exploration, development, production cycle and have averaged a 19.0% gain in 2017 YTD.</li>
<li>
Of the three segments, mining industrial minerals has been the strongest performer in the 2017 YTD with an average 30.4% gain, led Alliance Minerals Assets. Coal was the next best performer with the four stocks…</li>
</ul>


SGX lists four stocks mining industrial minerals including tantalite, phosphate, limestone and marble, four coal mining stocks and three gold mining stocks. These 11 stocks are at different stages in the exploration, development, production cycle and have averaged a 19.0% gain in 2017 YTD.

Of the three segments, mining industrial minerals has been the strongest performer in the 2017 YTD with an average 30.4% gain, led Alliance Minerals Assets. Coal was the next best performer with the four stocks…


Average 19% YTD Gain in Key Mining Stocks

Malaysia

Petronas Chemicals Group Bhd. is a chemical company. The Company offers a diversified range of petrochemical products such as olefins, polymers, fertilisers, methanol, and other basic chemicals and derivative products.

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Petronas Chemicals Group (PCHEM MK)

Lotte Chemical Titan IPO - More Valuation Debate

My estimate for Titan's FY17 EBITDA is ₩600bil and I'd give 8x EBITDA multiple. So, I get ₩4.8tril price tag for Titan, which is slightly lower...

Sanghyun Park

Lotte Chemical Titan IPO - Valuation Sensitivity Analysis

Below is a sensitivity analysis for Titan's valuation. Titan's proposed RM8 based MC ₩5,182bil seems to be standing at about 30% discount to the...

Sanghyun Park

Actionable Opportunities in Malaysia as Fundamentals Improve

Rising Malaysian exports, quickening GDP expansion, recovery in corporate earnings and a depressed MYR are spurring foreign interest in Malaysian...

David Riedel

Lotte Chemical Titan's Malaysia IPO Detail from Regulatory Filing

Lotte Chemical Corp (011170 KS) disclosed the details of Lotte Chemical Titan Holding Berhad (1512242D MK)'s IPO in a regulatory filing. The first...

Sanghyun Park

Average 19% YTD Gain in Key Mining Stocks

SGX lists four stocks mining industrial minerals including tantalite, phosphate, limestone and marble, four coal mining stocks and three gold...

Singapore Exchange Ltd (SGX)

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52-week Range

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