KUAL A LUMPUR, Aug 13 — Petronas Chemicals Group’s net profit for the first half of financial year 2019 (H1 FY2019) dropped 34 per cent in tandem with a 13 per cent revenue contraction, dampened by lower average product prices.

AmInvestment in its company report today said the lower H1 FY2019 revenue was also exacerbated by a lower sales volume, despite a higher performance unit (PU), as the previous period benefited from higher inventory drawdowns.

"Crude oil prices have dropped by 15 per cent since the Q2FY2019 average of US$68 per barrel over the exacerbating US-China trade war tensions and weakening global economic prospects, which has led to a decrease in prices of chemical compounds such as polyethylene, methanol and paraxlene,” it added.

It also expects weaker Q3 results, following average PU, could subsequently drop to below 80 per cent due to a turnaround in activities, but is expected to rebound in the following quarter.

AmInvestment also said that based on recent data, Petronas Chemicals’ earnings visibility remained clouded, given that the group’s product prices have a strong correlation to crude oil prices.

"Petronas Chemicals is currently trading at a reasonable FY2020 forecast enterprise value/earnings before interest, tax, depreciation and amortization of 9x, which is near its five-year average, while dividend yields are fair at three per cent,” it said.

The investment bank has also maintained its "hold” call for the stock.

As of 2.47pm, Petronas Chemicals was trading at RM7.25, 14 sen lower, with 5.5 million shares transacted. — Bernama