Pengerang Integrated Petroleum Complex (PIPC) : Malaysia Thematic

October 16, 2019
Malaysia Thematic
Pengerang Integrated
Petroleum Complex (PIPC)
Firing up soon Analysts
Mohshin Aziz
PIPC is a USD27b investment to develop Malaysia’s largest petrochemical
(603) 2297 8692
cluster. It is expected to transform the country from an importer to a net
mohshin.aziz@maybank-ib.com
exporter of refined petroleum products. This would be positive for
sustaining its trade/current-account surpluses. The project is expected Liaw Thong Jung
to commence commercial operations in Nov 2019. Dialog (DLG MK, BUY, (603) 2297 8688
TP: MYR4.88) should be an immediate beneficiary, in our assessment. tjliaw@maybank-ib.com
Petronas Chemicals (PCHEM MK, BUY, TP: MYR8.40), Petronas Gas (PTG
STRATEGY
MK, HOLD, TP: MYR16.80) and Petronas Dagangan (PETG MK, Not Rated) Tan Chi Wei, CFA
should also see meaningful contributions from 2020 onwards. (603) 2297 8690
chiwei.t@maybank-ib.com
Profitable venture
At operating capacity, we estimate that PIPC will generate annual
revenue of USD11b, based on an average crude-oil price of USD70/bbl.
There will be initial start-up losses, before it reaches breakeven
utilisation of 60-65%. Ramp-up will be gradual and the project should
reach full operating capacity in 2-3 years. PEMANDU forecast that PIPC
Malaysia
will contribute MYR8.5b pa to Malaysia’s GDP at operating capacity. Our

analysis deems PIPC feasible with low-teens project IRR - using historical
average rates - and NPV accretion (refer to Appendix I and II).
Potential impact on Malaysia

PIPC is expected to render multiple benefits to Malaysia. Firstly, it should
enhance its energy security and storage facilities for crude oil, natural
gas and refined petrochemical products. Secondly, it should enhance
Malaysia’s status in the downstream sector as Malaysia becomes a net
exporter of refined petroleum products. Malaysia used to import heavily
from Singapore and this will be fully substituted, in our view. Thirdly, it
is envisioned that the success of Phase I will attract more investments
and potentially turn PIPC into a leading petrochemical cluster globally.
Buy Dialog and PCHEM; HOLD PTG

Four listed companies have direct exposure to the PIPC, with varying
potential earnings impact. Dialog is already booking contributions from
its storage facilities, with further growth prospects. PCHEM, PTG and
PETG are expected to enjoy incremental growth from 2020 onwards.
Tenaga Nasional (TNB MK, BUY, TP: MYR15.50) should also benefit as an
off-taker of excess power generated, though contributions to its earnings
should be immaterial. IJN Corp (IJN MK, HOLD, TP:MYR2.10) has a
property development but the contributions to its earnings is immaterial.
Saudi Aramco (Not listed) has a 50% share in RAPID Project (the
petrochemical facilities component within PIPC). Its impending IPO is
banking heavily on its overseas expansion as its business growth driver.
Rec Shr px Mkt c ap TP PER (x) PER (x) PER (x) P/B (x) P/B (x) ROE (%) ROE (%) Net yield
(MY R) (MY Rm) (MY R) CY 18A CY 19F CY 20F CY 18A CY 19F CY 18A CY 19F CY 19F
Dialog Group Buy 3.46 19,520.1 4.90 36.5 34.6 31.7 4.8 4.9 14.3 14.2 1.1
Petronas Chemicals Buy 7.29 58,320.0 8.40 14.9 14.0 12.2 2.4 1.8 16.4 12.7 3.6
Petronas Gas Hold 16.58 32,807.3 16.80 19.5 16.6 17.5 2.9 2.4 14.0 14.6 4.2
Tenaga Nasional Buy 13.70 77,910.4 15.50 14.2 14.0 13.4 1.3 1.3 6.4 9.2 3.9
IJM Corporation Hold 2.26 8,224.8 2.10 15.1 19.4 18.1 0.6 0.8 4.2 4.4 1.8
THIS REPORT HAS BEEN PREPARED BY MAYBANK INVESTMENT BANK BERHAD PP16832/01/2013 (031128)
SEE PAGE 42 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS
Strategy Research
Table of Contents
1. Introduction to PIPC ................................................................................................................ 3
2. PIPC’s facilities ...................................................................................................................... 9
3. PIPC’s competitive advantages ................................................................................................... 17
4. Feasibility analysis .................................................................................................................. 18
5. Economic impact on Malaysia .................................................................................................... 21
6. What we think will happen ....................................................................................................... 22
7. Comparison of PIPC to Singapore ................................................................................................ 24
Dialog Group (DLG MK) ................................................................................................................... 27
Petronas Chemicals (PCHEM MK) ....................................................................................................... 32
Petronas Gas (PTG MK) ................................................................................................................... 37
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1. Introduction to PIPC
1.1 Background
PIPC is a USD27b mega-development in Pengerang, southeast Johor. It spans Figure 1: Location of Pengerang, Johor
81km2, which is equivalent to 10% of the size of Singapore. The project was kick-
started by PETRONAS back in 2011 with a vision to create a world-class
sustainable integrated petrochemical facility focusing on midstream and
downstream oil & gas operations.
PETRONAS’ first endeavour midstream and downstream took place in 1983, with
its Kertih crude-oil refinery. It went on to build integrated petrochemical
facilities in Kertih and Gebeng. These could not be expanded further due to
feedstock supply and physical constraints.
1.2 Why Pengerang was chosen

Pengerang was chosen for its natural and propitious attributes. Its coastline has a
draft of 24m, which enables the largest ships to berth. This coastline provides a
safe and sheltered harbour where no breakwater is required for coastal
development, providing significant cost-savings from ample available anchorage
space with minimal need for maintenance dredging. It is situated at the heart of
the busiest shipping lines in the world where Asia Pacific Asia criss-crosses with
the West.
Pengerang is sparsely populated, which helps to reduce environmental pushback

for the development of PIPC. PETRONAS was successful in relocating more than
3,000 residents in the PIPC enclave. Cash compensation was provided as well as
subsidised housing in relocated areas. Generally, its land-acquisition and
relocation process was smooth, for a project of this scale.
Figure 2: Transportation links to Pengerang
Source: Wikipedia
PIPC is 100km away from Johor Bahru, or a 1.5-hour journey in good traffic.
Senai Airport is 104km away, or 1.50 hours by road in clear traffic. There are also
scheduled ferry services from Teluk Belungkor, 40km away from PIPC, to
Singapore’s Changi Airport. The ferry services are a swift 25-minute journey via
Johor River to Changi Airport, which is only 15km away. There are also chartered
ferry services from Teluk Pengelih, 11km from PIPC, to Changi Airport.
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Strategy Research
1.3 PIPC objectives
(i) Attain self-sufficiency for crude-oil refining

PIPC’s primary business case is to raise Malaysia’s crude-oil refining capacity and
wean it off refined fuel imports. As Fig 4 suggests, Malaysia’s refining capacity
has been in a deficit since 2002. Its 2018 net deficit is forecast at 203 thousand
barrels per day (kbpd). When PIPC’s crude-oil refinery is fully operational, it
should boost Malaysia’s refining capacity by 50% with slight surplus capacity.
Figure 3: Crude-oil refineries in Malaysia Figure 4: Malaysia’s crude-oil consumption and refining
capacity
Capacity Year start kbpd
Refining surplus/(deficit) Consumption
Refineries Types of crude
(kbpd) operation Refining capacity
Hengyuan 156 1963 Light sweet

1,000
Petron 88 1963 Light sweet
Kertih 40 1983 Light sweet 800
Petronas Melaka 1 120 1994 Light sweet 600

Petronas Melaka 2 170 1999 Medium sour
Kemaman 30 2003 Heavy 400
Sub-total 604 200

Medium and
PIPC refinery 300 2019
heavy sour 0
Grand Total 904
-200
-400
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018F
2020F
Sources: Respective company websites Sources: Department of Statistics Malaysia, Maybank KE
Fig 5 shows the quantum of refined petroleum products imported by Malaysia

since 1995. Automobile fuel distributors such as BH Petrol and Caltex import all
their products, predominantly from Singapore and Thailand, with intermittent
imports from China and India. The others, PETRONAS included, import some of
their products to supplement their local production. RON 97 petrol, Euro 4 petrol
and Euro 5 diesel are fully imported as there are no local suppliers at the
moment.
Figure 5: Malaysia’s refined petroleum product imports
Petrol Diesel Others TOTAL

kbpd 334
276
94 264
34 245
228 50 228
36
200
178 57 51
178 88 102
161 67
155 63 79
144 146
137 133 136 48
128 124 123 125 61
122 96 114 119 89
80 62 55
60 50 50 34
54 56 65
65 54 34 42 56 53
32 22 25 26 34 152 147
29 26 27 22 140 131
25 37 39 25 26
23 110
89
65 66 74 72
53 55 57 61 57 60 57
39 43 43 37 43 43
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Sources: Department of Statistics Malaysia, Maybank KE

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Strategy Research
We forecast that Malaysia will enjoy near-complete import substitution of refined

petroleum products when PIPC reaches operating capacity. Gasoline and diesel
retailers use the same base material and add their proprietary additives and
rebrand the products as their own. For example, BHP Petrol buys gasoline from
PIPC, adds some additives and sells it as BH Petrol at its own kiosks. It doesn’t
matter if the oil refinery belongs to PETRONAS (its competitor).
We believe that PETG will be the main off-taker of refined petroleum products
from PIPC, followed by BH Petrol. Caltex currently imports fully from its parent
ExxonMobil’s oil refinery in Singapore.
(ii) Comply with environmental regulations

Malaysia’s fuel is currently graded Euro 2 for locally-produced RON95 and diesel.
This has been in practice since 1996. The government has a framework to raise
the minimum grade of fuel to Euro 4 by Jan 2020 and Euro 5 by 2025 (Fig 6). This
is part of Malaysia’s commitment to the Kyoto Protocol to reduce harmful
emission and contribute to a healthier environment.
Figure 6: Malaysia’s fuel standard framework

Fuel type Grade Start date Note
RON97 Petrol Euro 4 1 Sep 2015 Almost all RON97 is imported at the moment
RON95 Petrol Euro 4 1 Oct 2018 (postponed) Delayed as refineries complained they did not have enough time to
to 1 Jan 2020 comply
Diesel Euro 5 1 Sep 2020 Fuel kiosks can be introduced ahead of gazetted date
All grades of Petrol Euro 5 1 Sep 2025 Fuel kiosks can be introduced ahead of gazetted date
Sources: PETRONAS, Ministry of Energy
Existing refineries in Malaysia are racing to upgrade their facilities in order to

comply with the above. PETRONAS’ oil refineries in Melaka are spending MYR1.5b
on capex. The Hengyuan refinery in Port Dickson is undergoing a MYR700m capex
programme. The Petron refinery in Port Dickson is undergoing a USD100m capex
programme.
Malaysia lags other Asia-Pacific nations in fuel standard quality. Many of the key
players have skipped Euro 5 altogether and adopted Euro 6. Japan, South Korea,
Singapore, China and India are already complying with Euro 6. Even Indonesia and
Thailand migrated to Euro 5 years ago and other Asian countries aspire to adopt
Euro 5/6 in the medium term (Fig 7).
The crude-oil refinery at PIPC complies with Euro 5 specifications, which means
it is ahead of Malaysia’s compliance requirement at the moment. This also means
that its products can be exported to countries in the region which conform to
Euro 5 or below.
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Figure 7: Regulatory fuel standards equivalent to Euro standards

Country / Year 15 16 17 18 19 20 21 22
Brunei EURO 4
Cambodia (petrol) EURO 2
Cambodia (diesel) EURO 2
Indonesia (petrol) EURO 2 EURO 4
Indonesia (diesel) EURO 2 EURO 4
Laos (petrol) EURO 2
Laos (diesel) Sulphur max 5,000 ppm
Malaysia (RON 95 petrol) EURO 2 EURO 4
Malaysia (RON 97 petrol) EURO 4
Malaysia (diesel) EURO 2 EURO 5
Myanmar (petrol) EURO 1
Myanmar (diesel) Sulphur max 5,000 ppm
Philippines EURO 4
Singapore (petrol) EURO 6
Singapore (diesel) EURO 6
Thailand (petrol) EURO 6
Thailand (diesel) EURO 4
Vietnam EURO 4
China (petrol) EURO 6
China (diesel) EURO 6
India (petrol) EURO 6
India (diesel) EURO 3 on most regions of India
Australia EURO 4
Japan Next generation fuel (higher than EURO 6)
South Korea Next generation fuel (higher than EURO 6)
Sources: Respective government websites
(iii) Develop downstream petrochemical business

PETRONAS has roughly three decades of experience in the petrochemical industry
via its majority-owned subsidiary, PCHEM. PCHEM has diversified petrochemical
products portfolio and has market leadership position in Southeast Asia.
PIPC’s crude-oil refinery will yield substantial by-products such as naphtha and
petroleum condensates that are suitable feedstock for the petrochemical
industry. This has prompted PETRONAS to expand its petrochemical
manufacturing portfolio.
Figure 8: RAPID petrochemical complex schematics
Source: PCHEM
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Strategy Research
1.4 Impact on Pengerang district

Pengerang was a hinterland with oil-palm plantations and seven small fishing
villages. The Royal Malaysia Navy has a base in Tanjung Pengelih, housing its
southern fleet.
Pengerang’s population has been dwindling in recent years, in tandem with rural
migration to urban centres. Between 2000 and 2010, its population declined by
24%, or roughly 4,800 people (Fig 9). PIPC breathed new life into Pengerang. At
the height of its construction in 2016-18, there were approximately 70,000
workers, mostly men, raising its population by more than fivefold.
This sudden spurt of population growth bumped up real-estate rentals, which

soared to the highest in the country. Anecdotal evidence suggests that a basic
150sf room in a village cost MYR1,500/month then and a kampong house,
MYR10,000-12,000/month.
The population has subsided now that construction is at its tail end. The Johor
state government forecasts that PIPC could add 4,000-5,000 to Pengerang’s
population to a total of 20,000+ by 2020. This is about the same level as 20 years
ago.
Consumer prices have also settled to more realistic levels. Our ground checks
with sundry shops and consumer-related shops in Pengerang suggest that prices
are slightly lower than in Johor Bahru.
Figure 9: Population census of Pengerang district and forward projections
85,169
19,962 20,478
15,169
2000 2010 Height of construction 2020F
Sources: Department of Statistics Malaysia, Johor State Government
There are numerous new townships in the area such as Bukit Pelali, Sebana Cove,
Kampung Sungai Rengit and also in Bandar Penawar. IJN Corp owns Sebana Cove,
which is an integrated resort with a golf course, a marina and hotel. It also has a
housing development.
For now, most PIPC employees appear to have no plans to relocate their families
to these townships due to a lack of school, commercial and recreational
facilities. We think Pengerang’s population make-up will consist mainly of blue-
collar workers associated with the PIPC. This is consistent with the major
petrochemical clusters globally that are remotely located.
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Strategy Research
Figure 10: Housing developments launched at Pengerang
Bukit Pelali Escadia, Bandar Penawar Sebana Cove integrated township
Sources: Respective company websites
Figure 11: Pengerang’s strategic location
Source: Yusuf Ishak Institute
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Strategy Research
2. PIPC’s facilities
Fig 12 provides a flowchart of PIPC’s business. PIPC currently imports 300 kbpd of
crude oil via sea and refines it to 220 kbpd petroleum products. It will further
process 75 kbpd of refined products into petrochemical products. Most of its
petroleum products are for domestic consumption while its petrochemical
products are mainly exported.
PIPC has infrastructure for utilities such as water, natural gas, power and
industrial gases. Any surplus is channeled to state and national grids.
We estimate that there is ample space at Pengerang for 2-3 more refineries
and/or more petrochemical plants. Its current master plan envisions that PIPC
will be able to support growth opportunities for the next 40-50 years.
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Figure 12: PIPC’s facilities
Petroleum, 98 kbpd
Product
storage
Air 220 kbpd Diesel, 88 kbpd

Air seperation
separation
unit
unit oxygen Jet A1, 28 kbpd
nitrogen Fuel oil, 5 kbpd local customers
Deepwater Port Facility
Others
Crude oil refinery

300 kbpd
Crude oil
storage
LPG, condensates Naphtha Petrochemicals

& naphtha 75 kbpd cracker Ethylene - olefins
Propylene - derivatives
Raffinate - recoveries
Butadiene
terminal
LNG
Residue 5 kbpd
ARDS * Sulphur 4 kbpd
electricity + process steam
waste RAPID Project

Water
Regas plant Power plant
natural gas process water reservoir Infrastructure facilities
Storage facilities
Peninsular Gas Unit National grid Johor water authority Import

Export
* ARDS = atmospheric residue desulphurisation unit

Sources: PIPC, Maybank KE
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Strategy Research
Figure 13: PIPC’s components

Pengerang Integrated Pengerang Deepwater Pengerang Maritime
Complex (PIC) Terminal (PDT) Industrial Park (PMIP)
Size of land (acres) 6,239 657 landside + 500 reclaimed 1,673
Main projects and (i) RAPID Project (i) Berth facilities Phase I entails land reclamation
costs - crude oil refinery (USD10b) (ii) Crude oil storage for imports from sea up to 1,673 acres over
- naphtha cracker (USD4.5b) and exports 6-7 years
- petrochemical complex (USD2.7b) (iii) Petroleum product storage
(ii) Raw water supply (n.a) (iv) Petrochemical product storage
(iii) Cogeneration plant (MYR5b) (v) LNG terminal
(iv) Regasification terminal (MYR2.7b)
(v) Air separation unit (MYR0.7b)
(vi) Other support services (n.a)
Cost estimate (MYR b) 89 5 14 (over the period of project)

Sources: PETRONAS, PRefChem, PCHEM, PTG, Dialog, Vopak
2.1 PIC
PIC or the Pengarang Integrated Project will take up the bulk of PIPC’s land and
project value. RAPID Project is the mainstay of the entire PIPC. It consists of a
crude-oil refinery, naphtha steam cracker and petrochemical complex. RAPID is
estimated to cost USD16b. It is a 50:50 JV between PETRONAS and Saudi Aramco
via two agreements. Pengerang Refining and Petrochemical (PRefChem) operates
the crude-oil refinery and naphtha cracker. It is equally owned by PETRONAS and
Saudi Aramco. PRPC Polymers Sdn Bhd operates the petrochemical plant. It is
equally owned by PCHEM and Saudi Aramco.
Saudi Aramco paid USD7b for PRefChem in 2017 and a further USD0.9m for PRPC
Polymers in 2019. PETRONAS sold its 50% stake to Saudi Aramco at cost.
Figure 14: RAPID’s shareholdings
50% 50%
50% 50%
PRPC Polymers
Refinery Naphtha cracker
Sources: PETRONAS, PrefChem, PCHEM
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Strategy Research
PIC includes all support infrastructure for water, natural gas etc to fire up the
power plant and process industrial gases. Normally, in other petrochemical
clusters, these will be undertaken by respective utility providers and locked
under long-term supply contracts. However, since PIPC is a greenfield project,
PETRONAS decided to undertake all these massive investments itself to mitigate
risks.
RAPID’s major support facilities:
Projek Air Mentah RAPID (PAMER): PAMER is wholly-owned by PETRONAS. It

consists of a reservoir in Selagut and an 88km water pipeline to PIC. This provides
the raw water PIC needs and has been in operations since Jul 2016. Currently in
Phase I, it provides 230 million litres per day (MLD) to PIC and another 30 MLD to
the State of Johor Water Authority. Phase II expansion in the future could
provide another 260 MLD, as and when needed.
Pengerang Power Sdn Bhd (cogen): This cogen plant is wholly-owned by

PETRONAS. It provides all of PIC’s power and steam requirements and channels
excess electricity to the national grid. It cost MYR5b to build and can generate
1,220 MW of electricity and 1,480 tonnes per hour of process steam at full
capacity. It has four units of Siemens H-class turbines, touted as the world’s
most-efficient combined-cycle gas-fired generators with an efficiency rating of
61%.
PETRONAS has secured a 21-year contract with Tenaga Nasional to provide 400
MW. It plans to increase this to 600 MW by end-2019. The plant has been in
operations since Oct 2017.
Pengerang Regasification Terminal 2 (RGT2): RGT2 handles LNG unloading and

reloading, storage, handling and regasification. It provides natural gas to the
cogen plant and naphtha cracker and also be injected into the peninsular gas unit
(PGU). RGT2 is a JV between Petronas Gas (65%), Dialog (25%) and Johor State
Government (10%) and cost approximately MYR2.7b to build.
RGT2 consists of a receiving jetty terminal, one regasification unit and two LNG
tanks with a combined capacity of 3.5 mtpa. There are no plans to expand its
capacity. RGT2 is capable of importing and exporting LNG. It has been in
operations since Oct 2017.
Air separation unit (ASU): ASU is a JV between Petronas Gas (51%) and Linde
(49%). It provides 3,400 tonnes per day of industrial gases, namely oxygen,
nitrogen and argon, to PIC. It cost MYR690m and has been in operations since Jul
2018.
Others: Other support facilities at PIC cater to emission control, waste

management and treatment.
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2.2 PDT
PDT represents Dialog’s vision to replicate the success of Rotterdam-Antwerp in
Europe. It aims to build a downstream hub for oil, gas and petrochemicals in
Asia. PDT is also intended to complement Singapore’s Jurong hub as the latter’s
expansion for storage terminals is constrained by land.
Located at the southern tip of Peninsular Malaysia and covering 1,200 acres - 600
of reclaimed land and 600 of onshore land, it is strategically located along major
international shipping routes. PDT is unique in Southeast Asia whereby it has
sizeable 24m deep-water berths, which enable it to handle VLCCs, ULCCs and
LNG vessels up to Q-Max sizes.
Figure 15: Demand for petroleum terminals and oil trading
Source: Company
PDT will be constructed in phases in pace with demand needs. Phase 1 has
commenced operations, Phase 2 partially and Phase 3 will go live by end-2021.
 Phase 1: Pengerang Independent Terminals Sdn. Bhd. (PITSB), the

Phase 1 of PDT, covers 150 acres of reclaimed land and serves as
a tankage facility for handling, storage, blending and distribution
for oil majors and traders.
Phase 1 commenced operations in 2014 and PITSB was included in

the Platts FOB Straits price benchmark in mid-2015. Since then,
the storage facility has been fully leased out. PITSB has 50
petroleum product tanks and seven crude-oil tanks with storage
capacity of 1.3 million mᵌ.
Phase 1E is underway, which will add 430,000 mᵌ of storage

capacity by end-2019. Capacity can rise to 1.3m mᵌ, on an optimal
basis. In total, with a MYR3.2b investment, PITSB can
accommodate up to 2.6m mᵌ storage capacity.
PITSB is owned by Dialog (45.9%), Vopak (44.1%) and Permodalan

Darul Takzim (10%).
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Figure 16: Phase 1: Pengerang Independent Terminals (PITSB)
Source: Company
 Phase 2: Phase 2, Pengerang Terminals (Two) Sdn Bhd (PT2SB) is

a dedicated industrial terminal for PETRONAS’ RAPID Project. It
covers 157 acres of reclaimed land, at a MYR6.3b investment. It has four
shareholders: PRPCUF (40%), Dialog (25%), Vopak (25%) and Johor State
SSI (10%).
Operationally, it has 1.3m mᵌ of storage capacity for crude oil,

refined petroleum and petrochemical products and is targeted for
commissioning by end-2019.
Phase 2 also includes LNG regasification facilities comprising a

regasification unit and two units of 200,000 mᵌ LNG storage tanks;
known as Pengerang LNG2 (PLNG2). PLNG2, a MYR2.7b
investment, is owned by Petronas Gas (65%), Dialog (25%) and
Permodalan Darul Ta’zim (10%).
Figure 17: Phase 2: Pengerang Terminals (TWO) (PT2SB)
Source: Company
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Figure 18: Phase 2: Pengerang LNG2 (PLNG2)
Source: Company
 Phase 3: Phase 3 will equate to Phases 1-2 in size, or 300 acres.
Land reclamation for 300 acres, which commenced in May 2018, is 73%
completed. Full completion is expected by end-2019.
Consequently, the construction of a Phase 3A tankage facility (SPV5) has

commenced. This is 10% completed and should be fully completed by
mid-2021.
This facility is earmarked for BP Singapore, which will take up 430k cu m

of dedicated storage capacity for clean petroleum products. This is
about 10% of the land in Phase 3.
Dialog will own 90% of Phase 3A, with PTD holding the remaining 10%.
For the development of this facility, Dialog: PDT’s equity structure will
be 80:20.
Figure 19: Pengerang deepwater terminals, including Phase 3
Source: Company
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2.3 PMIP
PMIP is a project to reclaim a 3.7km seafront from Pengerang eastwards to
Tanjung Ramunia. After reclamation, it will be able to accommodate up to 20
berths to cater ships ranging from 2,000 dead weight tonnes (DWT) to 35,000
DWT. There are also several commercial and industrial areas geared up for future
development. Adjacent to the PMIP site is the Pengerang Integrated Development
Project (PIDP). PIDP envisages to house corporate office towers, serviced
apartments and retail, conference & banquet facilities.
PMIP and PIDP progress is slower than the rest of PIC as it is contingent on when
PIPC reaches Phases II-III. This is when the area presumably has a bigger
population with more economic activity.
Figure 20: Conceptual master plan of PMIP
Source: Benalec
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3. PIPC’s competitive advantages
3.1 Highly-integrated
Integration at PIPC will extend from feedstock to final products (Fig 21). By being
an integrated off-taker, it can save on energy (less heat wastage), distribution
(next door from one process to the next) and power & other utilities.
Furthermore, the adjacent port can provide seamless shipment and reduce
logistics costs.
Figure 21: Integrated schematics of PIPC
Source: Wikipedia
3.2 Scalability
Economies of scale are important for any industrialised business. RAPID has a
world-scale crude-oil refinery as well as naphtha cracker and petrochemical
facilities. Its 300 kbbl/day crude-oil refinery is the 42nd largest among 636
refineries globally. Similarly, its petrochemical complex with a capacity of 3.6
mmtpa is the world’s top-20 biggest petrochemical plant.
3.3 Technology
PETRONAS has incorporated the best and most efficient technologies available
for the development of PIPC and RAPID.
3.4 Feedstock-cost advantage

Saudi Aramco will supply 50% of the medium-to-heavy sour crude oil needed by
the refinery, with an option to increase to 70%. This crude oil is very desirable as
it delivers high petrochemical product yields. PRefChem’s management stated
that Saudi Aramco can provide the lowest quoted prices in Asia to PIPC. As
feedstock makes up 70-85% of operating costs in the petrochemical industry,
even a USD1/bbl discount can translate to meaningful margin expansion.
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4. Feasibility analysis
4.1 Crude-oil refining business looks attractive

Fig 22 suggests that Asia-Pacific refining capacity has grown significantly since
1980. Back then, the region’s share of global refining capacity stood at 16%. This
grew to 35% by end-2018, following economic growth in China, India and ASEAN.
The three in aggregate made up 43% of the global population.
The refining margin indicator for the past decade has been positive, as proxied
by the Singapore gross refining margin (GRM). GRM for Singaporean crude oil
refineries averaged USD6.1/bbl in those 10 years.
As oil refined in Singapore is graded 7 in the Nelson Complexity Index* (NCI) while
PRefChem’s oil is graded 10, we believe that PRefChem’s GRM can command a
premium of 30% to Singapore’s GRM.
* A complex refinery is one with large number of conversion and cracking units.
It is more versatile and can handle lower-grade crude oil and convert it to the
highest-quality refinery products, including fuels and petrochemicals. This will
ultimately expand GRM.
Figure 22: Global crude oil refining capacity Figure 23: Singapore GRM
Asia Pacific Rest of world USD / bbl
m bbls/day
120 10
CAGR (2018:1980)
Asia Pacific = 2.7%
100 World = 0.6% 8
80 6
60
4
40
2
20
0
1Q10
1Q09
1Q11
1Q12
1Q13
1Q14
1Q15
1Q16
1Q17
1Q18
1Q19
0
1980 1985 1990 1995 2000 2005 2010 2015
Source: BP Oil Stats Source: Bloomberg
Feasibility analysis of crude-oil refinery

Our simple feasibility analysis assumes: a capital cost of USD10b, straight-line
depreciation of 25 years with zero residual value, GRM of USD7.9/bbl for the
entire 25-year period, maintenance capex of USD100m pa, gradual increases in
utilisation to 90% and a 5-year turnaround cycle with four months of shutdown
(Appendix I).
Based on these assumptions, we obtain a project IRR of 10.8%, payback period of

nine years and NPV of USD10.7b, assuming a discount rate of 10%. This suggests
that the refinery project is feasible and can add value. Should Saudi Aramco
supply its crude oil at a discount, say USD1/bbl cheaper, project IRR could be
boosted to 11.9%, payback period lowered to 8.5 years and NPV bumped up to
USD11.7b (Fig 24). For the crude-oil refinery to achieve neutral NPV, GRM must
average USD7.2/bbl, based on our forecasts.
October 16, 20199 18

Strategy Research
Figure 24: RAPID crude-oil refinery sensitivity analysis
IRR (LHS) NPV (RHS)

USD b
14% 12,000
13% 11,000
12% 10,000
11% 9,000
10% 8,000
9% 7,000
8% 6,000
7% 5,000
4 5 6 7 7.2 8 9
GRM USD/bbl
Source: Maybank KE
4.2 Petrochemical sector facing a slump

The petrochemical industry is currently in one of its most severe downturns. The
ongoing trade tiff between the US and China has detached the industry from its
historical fundamentals. The price correlation between petrochemical and crude
oil has been broken and producers don’t have much pricing power. We discussed
this in detail in our recent sector note dated 18 Jun 2019 [link].
Feasibility analysis of petrochemical portfolio

Any feasibility analysis of the petrochemical business is not straightforward as
there are two components: naphtha cracker and downstream petrochemical
plants. The naphtha cracker at PIPC is owned by PRefChem and its petrochemical
plants, by PRPC Polymers.
As the supply arrangement between PRefChem and PRPC Polymers is not publicly
known, we are only able to run a feasibility analysis of the naphtha cracker, not
the petrochemical plant.
We made the following assumptions: a capital cost of USD4.5b, straight-line

depreciation of 25 years with zero residual value, product margins of
USD200/tonne achievable for an integrated cracker, maintenance capex of
USD60m pa, gradual increases in utilisation to 90% and a 5-year turnaround cycle
with four months of shutdown (Appendix II).
Based on these assumptions, we obtain a project IRR of 12.0%, payback period of

nine years and NPV of USD5.3b, assuming a discount rate of 10%. Should Saudi
Aramco supply its crude oil at a discount, say USD1/bbl cheaper, this will lower
naphtha costs by USD21/tonne and boost project IRR to 13.0%, lower payback to
eight years and lift NPV to USD5.7b (Fig 25). For the naphtha cracker to achieve
neutral NPV, product margins must average USD159/tonne, based on our
forecasts.
October 16, 20199 19

Strategy Research
Figure 25: RAPID naphtha cracker sensitivity analysis
IRR (LHS) NPV (RHS)

USD b
20% 10,000
16% 8,000
12% 6,000
8% 4,000
4% 2,000
0% 0
0 50 100 150 159 200 250 300 350
product margin USD / tonne
Source: Maybank KE
4.3 LNG is cheap at the moment

LNG is well below its 5-years average price of USD7.2/mmBtu, hovering near its
lowest in five years. This should ensure cheap power and steam for PIPC.
Figure 26: Singapore average LNG prices
USD / mmBtu
16
14
12
10
8 Average = 7.2
0
2014 2015 2016 2017 2018 2019
Source: Bloomberg
October 16, 20199 20

Strategy Research
5. Economic impact on Malaysia
5.1 Malaysia’s most expensive project ever

PIPC is the single largest investment in Malaysia’s history. Never before has one
district attained so much economic prominence. To put things in perspective, the
aggregate costs to construct Putrajaya (MYR33b), Kuala Lumpur International
Airport (MYR15b), Mulia Tower (MYR3.5b), Warisan Tower (MYR2.5b) and all the
capital injected by the government to keep Malaysia Airlines afloat (MYR31b)
roughly equal PIPC’s Phase I investment.
5.2 Energy security is enhanced

PIPC will enhance Malaysia’s energy security in three ways. Firstly, RGT2 will
provide a second inlet to import LNG. This enhances the supply integrity of PGU.
Secondly, Malaysia will be self-sufficient in crude-oil refining. This attribute is
further enhanced by its long-term crude-oil supply contract with Saudi Aramco.
Saudi Aramco is in control of the world’s third-largest crude-oil reserves and is
the biggest global crude-oil exporter. Thirdly, the country benefits from having a
higher storage capacity of energy products such as LNG, crude oil and refined
petroleum products.
5.3 Revenue contributions of USD11.3b pa

Fig 27 shows our revenue forecasts for PIPC. Revenue could potentially reach
USD11.3b pa when it reaches full operating capacity, sometime in 2022E. Crude-
oil refineries typically undergo 5-year turnaround cycles with maintenance
shutdown of four months. This explains why we forecast a drop in 2024 revenue.
Figure 27: Revenue from PIPC

2020E 2021E 2022E 2023E 2024E 2025E
Revenues (USD m):

Crude oil @ USD70/bbl 4,321 7,346 7,779 7,779 5,186 7,779
Petrochemicals @ USD900/tonne 1,512 2,571 2,722 2,722 1,815 2,722
Sulphur @ USD50/tonne 11 19 21 21 14 21
Power sold to TNB 246 369 369 369 369 369
Natural gas into PGU 131 131 131 131 131 131
Water to Johor State @ MYR132/ML 1 1 1 1 1 1
Storage and distribution 264 589 604 611 632 647
Total 6,382 10,707 11,308 11,308 7,705 11,308
Source: Maybank KE forecast
5.4 PIPC to make up 2.7% of Malaysia’s manufacturing

sector and boost GDP by 0.6%
We forecast net GDP contributions of MYR8.5b pa when PIPC reaches full
operating capacity. This is after filtering out raw-material imports from revenue.
Based on this, it equates to 2.7% of Malaysia’s manufacturing output of MYR312b
in 2018. The manufacturing sector made up 21.6% of Malaysia’s GDP in 2018 and
has been growing at a 10-year CAGR of 5%. PIPC is expected to boost its growth
momentum.
October 16, 20199 21

Strategy Research
5.5 Boost labour productivity

We forecast that PIPC productivity will be high at MYR1.4m per employee. We
assume that PIPC will contribute MYR8.5b to GDP and create 6,000 new jobs. This
productivity is 17.1x higher than the national average of MYR83,056 in 2018. It is
also 12.5x higher than the manufacturing sector’s average productivity of
MYR113,519 in 2018.
All else being equal, PIPC’s productivity should boost the national average by
0.7%.
Figure 28: Malaysia’s labour productivity by sector (2018)
figures in MYR/pax
1,416,667
83,056 113,519
43,220 52,092 75,075
Construction Agriculture Services Average Manufacturing PIPC
Sources: Department of Statistics, Maybank KE
6. What we think will happen
6.1 Magnet for more downstream investments

We believe global petrochemical majors have earmarked PIPC in their growth
plans. The success of PIPC Phase I has proven that Malaysian regulators are
supportive, environmentalist backlash is not an issue, primary infrastructure is
good and the workforce is both competent and sufficient. Plus, PIPC’s final
project cost was USD27b, well below its budget of USD29b.
Thus far, there has been no announcement of new projects. But globally, there
have also been a dearth of new project announcements and delays in many final
investment decisions for petrochemical projects in the past 1.5 years. This is
probably due to the many uncertainties engulfing the petrochemical industry.
We are of the view that this is a blip as global supply will inevitably fail to track
global demand growth if there is no capacity addition given that global demand
for petrochemicals is forecasted to grow at c4% p.a in the medium-term.
Therefore, we are reasonably confident that project newsflow will resume at
PIPC in the next 2-3 years.
October 16, 20199 22

Strategy Research
6.2 PETRONAS may need a partner for Phases II-III

For now, PIPC is a driven by a single company: PETRONAS. Saudi Aramco is
involved more as a strategic supplier and financial partner; it does not drive its
development.
It is difficult for PETRONAS to spearhead PIPC’s expansion alone as the financial

undertaking and technical requirements are too huge. We believe PETRONAS will
have to seek partners to diversify and expand PIPC’s value chain and product
portfolio.
6.3 Phases II-III viability might require asset restructuring

Would-be investors, however, might be concerned that PETRONAS has near full
control of PIPC. While some companies would have no problems with this, others
may rather deal with independent utility providers that can provide equal-access
contracts. PIPC’s current power, steam, water and industrial-gas providers are all
owned by PETRONAS.
Therefore, we see some merit for PETRONAS to pare down its stakes in all the
primary utilities and relinquish its management control.
6.4 PIPC could potentially be the world’s top-10

petrochemical cluster
Fig 29 profiles the world’s largest petrochemical clusters and PIPC’s position
today, also its full potential. At Phase I, PIPC was ranked the 43rd largest
petrochemical cluster globally. Should its full growth potential be realised, it can
potentially jump up to the sixth spot, assuming everything else is the same.
Although the other petrochemical clusters may also have growth plans of their
own, we believe PIPC’s Phase III should place it among the top-10 of the
petrochemical clusters.
Figure 29: World’s top-25 petrochemical clusters
m bbls/day
1,549
1,492
1,240
1,093 1,061
1,000
877 840 837 832
775
689 669 652
585 556 562 550 540
475 463 450 436 406 400
300
Pine Bend, USA
Singapore
Garryville, USA
PIPC (Phase I)
Port Arthur, USA
Onsan, South Korea
Baton Rouge, USA
Kuwait
Nayara, India
PIPC (Phase III)
Baytown, USA
Lake Charles, USA

Yeosu, South Korea
Corpus Cristi, USA
Ras Tanura, Saudi Arabia
Houston, USA
Los Angeles, USA
Ruwais, UAE
Texas City, USA
Maillao, Taiwan
Abadan, Iran
Rabigh, Saudi Arabia

Rotterdam-Antwerp
San Francisco, USA

Ulsan, South Korea
Jamnagar, India
Sources: Respective companies, Maybank KE
October 16, 20199 23

Strategy Research
7. Comparison of PIPC to Singapore
7.1 Will PIPC compete with or complement Singapore?

PIPC’s primary raison d’etre was to boost the domestic supply of refined
petroleum products for national self-sufficiency. Its export and transhipment
businesses are consequential opportunities.
Singapore’s petrochemical foray is export-oriented and the island-state has

steadily grown to become the world’s second-largest petrochemical cluster.
PIPC’s emphasis on exports will only materialise sufficiently under Phases II-III,
which would be many years away. Therefore, there is little overlap between PIPC
and Singapore for the time being.
Still, Malaysia imports a significant proportion of its refined petroleum products

from Singapore (Fig 30). In 2017, its imports amounted to USD7b or 42% of its
total. We believe that this amount will decline substantially when PIPC is in
operations. Although this may appear that PIPC is taking market share away from
Singapore, in reality, PIPC is just addressing local demand and substituting
imports.
Figure 30: Malaysia’s refined petroleum products imported from Singapore
Value (LHS) % of total imports (RHS)

USD billion
14 100%
12 90%
10 80%
8 70%
6 60%
4 50%
2 40%
0 30%
2007
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: OEC
7.2 Singapore will remain key trading hub of the East

We believe Singapore will retain its status as the key oil & gas trading hub of the
Asia Pacific, even when PIPC’s entire master plan comes to fruition. This is
because Singapore has a comprehensive ecosystem for trade, storage,
transshipment, bunkering, manufacturing and research & development. In
addition, it has an established trading house that sets Platts benchmark prices for
petroleum products in the region as well as the futures market.
Malaysia never aspired to be a trading house for oil & gas. In fact, its flagship
Tapis crude oil is being traded only on the Singapore exchange. Also, there are
already quotations for middle distillates and petrol from RAPID Project on Platts.
October 16, 20199 24

Strategy Research
Figure 31: Comparison between PIPC and Singapore’s downstream oil industry
PIPC (Phase I) Singapore PIPC Masterplan
Land area (hectares) 20,000 8,381 20,000

Number of physical sites 1 (Pengerang) 4 (Jurong, Bukom, Tuas, Sebarok) 2 (Pengerang, Ramunia)
Crude-oil refineries
Types of crude to be refined Medium to Heavy sour Light to Heavy Medium sour, others
Number of oil refineries 1 4 ≥2
Crude oil refining capacity (‘000 barrels / day) 300 1,492 1,000
Product output (‘000 barrels / day) 220 n/a 700-740
- Petrol (‘000 barrels / day) 98 (Euro 5) Euro 4-6 n/a
- Diesel (‘000 barrels / day) 88 (Euro 5) Euro 5-6 n/a
- Jet kerosene A1 (‘000 barrels / day) 28 n/a n/a
- Fuel oil (‘000 barrels / day) 5 n/a n/a
LNG facilities
Terminal capability Import/Export Import/Export Import/Export
Regasification capacity (million tonnes / year) 3.5 6.0 3.5
Petrochemical facilities
Olefin output (million tonnes / year) 1.861 4.775 n/a
Nameplate capacity (million tonnes / year) 3.6 9.8 11.8
Port facilities
Draft depth (meters) 24 12-23 24
Maximum LOA (meter / vessel type) 350 (VLCC) 400 (ULCC) 350 (VLCC)
Maximum vessel size (deadweight tonnes) 350,000 180,000 350,000
Number of berths 6 59 12
Crude oil storage capacity (million m3) 1.3 10.0 5.0

LNG storage capacity (million m3) 0.4 0.8 ≥0.4
Clean product storage capacity (million m3) 1.3 4.9 1.5
Support facilities
Power plants (MW) 1,220 From the grid 1,220
Cogeneration steam (tonnes / hour) 1,480 n/a 1,480
Air separation unit industrial gases (tonnes / day) 2,954 n/a 2,954
Raw water supply (million liters / day) 260 n/a 520
Sources: PETRONAS, Shell, ExxonMobil, Neste, Dialog, Maybank KE
October 16, 20199 25

Strategy Research
Appendix I: Crude oil refinery IRR analysis

Y ear 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044
Duration 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Assumptions:
Capital cost (USD m) -10,000
Utilisation rate 50% 85% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60%
GRM (USD/bbl) 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93 7.93
Capacity (kbbls/day) 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300 300
Maintainence Capex (USD m) -50 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
Depreciation (USD m) -455 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400 -400
Deposit rate 2.0%
Cashflow Analysis (USD m)

GRM 434 738 782 782 521 782 782 782 782 521 782 782 782 782 521 782 782 782 782 521 782 782 782 782 521
Depreciation 455 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400 400
Capex -50 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100 -100
Interest earned 1 17 38 60 83 101 125 149 174 199 219 245 272 299 326 349 378 407 437 467 493 524 557 589 623
NET CASH FLOW -10,000 840 1,055 1,119 1,142 904 1,183 1,206 1,230 1,255 1,020 1,301 1,327 1,353 1,380 1,147 1,431 1,459 1,489 1,518 1,288 1,574 1,606 1,638 1,671 1,444
Cumulative cash 840 1,895 3,014 4,156 5,060 6,243 7,449 8,679 9,934 10,954 12,255 13,581 14,934 16,315 17,462 18,893 20,352 21,841 23,359 24,647 26,221 27,827 29,465 31,136 32,580
IRR 10.8%
NPV 10,715
Appendix II: Naphtha cracker IRR analysis

Y ear 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044
Duration 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Assumptions:
Capital cost (USD m) -4,500
Utilisation rate 50% 85% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60% 90% 90% 90% 90% 60%
Product margin (USD/tonne) 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200
Capacity (m tons p.a.) 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344 2,344
Maintainence Capex (USD m) -30 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60
Depreciation (USD m) -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180
Deposit rate rate 2.0%
Cashflow Analysis (USD m)

Product margin 234 398 422 422 281 422 422 422 422 281 422 422 422 422 281 422 422 422 422 281 422 422 422 422 281
Depreciation 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180 180
Capex -30 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60 -60
Interest earned 1 8 18 29 41 50 62 74 86 98 108 121 135 148 162 173 188 202 217 232 245 261 277 293 310
NET CASH FLOW -4,500 385 526 560 571 442 592 603 616 628 500 650 663 677 690 563 715 730 744 759 634 787 803 819 835 711
Cumulative cash 385 912 1,472 2,043 2,485 3,077 3,680 4,296 4,924 5,423 6,074 6,737 7,414 8,104 8,667 9,383 10,112 10,856 11,615 12,249 13,036 13,839 14,657 15,492 16,203
IRR 12.0%
NPV 5,311
October 16, 2019 26

3.47
October 16, 2019

Shariah Compliant
Dialog Group (DLG MK)

BUY
Jackpot in Pengerang Share Price
12m Price Target
MYR 3.47
MYR 4.90 (+41%)
Previous Price Target MYR 4.90
Secular growth prospects; maintain BUY Company Description

The largest tank terminal operators in Malaysia with
Dialog’s prime land in Pengerang, operating track record and financial
EPCC works
strength are enablers for capitalising on demand for storage terminals in
Asia, in our opinion. Maximising its Phase 3 capacity should spur its
growth and franchise value as the operator of a strategic hub akin to
Rotterdam. Our unchanged SOTP-based TP incorporates storage capacity Statistics
(+49%) equity holdings (+4-44%) and its greenfield land valued at 52w high/low (MYR) 3.53/2.75
Oil & Gas
MYR1.3b. 3m avg turnover (USDm) 6.7

Free float (%) 67.0
Issued shares (m) 5,642
Pengerang Phase 3 offers long-term visibility
Market capitalisation MYR19.6B
Phase 3 land reclamation is underway. Its initial stage (SPV5) will kick off USD4.7B
with BP’s 430k cu m dedicated terminal starting end-FY21. The size of Major shareholders:
Phase 3 matches that of Phases 1 & 2 combined, at 300 acres. Effective Azam Utama Sdn. Bhd. 8.3%
utilisation of the land can provide up to 6m cu m of storage capacity. We Employees Provident Fund 7.9%
believe maximising Phase 3’s capacity offers long-term operating Wide Synergy Sdn. Bhd. 7.8%
visibility. With RAPID due to go live by end-2019, creating a downstream

Malaysia
hub for refineries/ petrochemicals/ specialty chemicals there akin to Price Performance
Jurong Island in Singapore should catalyse Dialog’s business. 3.60 250
3.40 230
Sitting on a gold mine 3.20 210
We see further value-creation potential beyond Phase 3. Dialog still has 3.00 190
up to 600 acres of onshore land, previously considered a buffer zone, for 2.80 170
new development. With its proximity to downstream hubs - RAPID & 2.60 150
Singapore - and nearby land earmarked for new investments, we believe 2.40 130
its strategic location next to international shipping routes is a clear 2.20 110
advantage/ winner. That said, the asset in our view is worth MYR784m- 2.00
Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19
90
Oct-19
1.8b or MYR0.14-0.32/share at MYR30-70 psf, with strong monetisation Dialog Group - (LHS, MYR)
prospects. Dialog Group / Kuala Lumpur Composite Index - (RHS, %)
-1M -3M -12M

Financials to leverage prospects Absolute (%) (1) (1) 2
We believe its solid balance sheet and financial management also permit Relative to index (%) 2 5 13
Dialog to hold higher equity stakes of above 50% vs sub-50% previously in Source: FactSet
upcoming storage-terminal ventures. Its ability to declare constant

dividends – at 40% payouts – stands out among peers.
FYE Jun (MYR m) FY18A FY19A FY20E FY21E FY22E
Revenue 3,111 2,386 2,588 2,630 2,814
EBITDA 570 650 633 654 794
Core net profit 426 535 595 633 727
Core EPS (sen) 7.6 9.5 10.5 11.2 12.9
Core EPS growth (%) 24.0 25.6 11.1 6.5 14.8
Net DPS (sen) 3.2 3.8 4.2 4.5 5.2
Core P/E (x) 40.9 34.4 32.9 30.9 26.9
P/BV (x) 5.0 4.8 4.7 4.3 3.9
Net dividend yield (%) 1.0 1.2 1.2 1.3 1.5
ROAE (%) 15.4 14.7 14.9 14.5 15.1
ROAA (%) 7.0 8.2 8.5 8.5 8.8
EV/EBITDA (x) 31.3 29.7 32.6 31.6 26.1
Net gearing (%) (incl perps) 9.6 20.2 20.8 20.3 18.2
Consensus net profit - - 581 630 na
MKE vs. Consensus (%) - - 2.3 0.5 na
Liaw Thong Jung

tjliaw@maybank-ib.com
(603) 2297 8688
October 16, 2019 27

Dialog Group
Update on Pengerang Phase 3

We recently toured Dialog’s Pengerang facilities. Land reclamation for Phase 3
measuring 300 acres, which commenced in May 2018, is now 73% completed, with
work expected to end by-end 2019. Phase 3 equates to Phases 1 and 2 combined
in size.
Consequently, it has commenced the construction of its Phase 3A tankage facility

(SPV5). This is 10% completed and should be completed by mid-2021.
Phase 3A is earmarked for client BP Singapore, which will take up 430k cu m of

dedicated storage capacity for clean petroleum products. This forms about 10%
of the land in Phase 3.
Dialog will own 90% of Phase 3A, with Permodalan Darul Ta’zim (PDT; a 100%
subsidiary of State Secretary, Johor holding the remaining 10%. For developing
this facility, Dialog: PDT’s equity structure is 80:20.
Based on our back-of-envelope estimates, SPV5 could contribute 26sen/ share to

NPV and MYR90m-168m pa to net profits.
All in all, based on Phase 3’s masterplan, capex will be about MYR2.5b for
common tankage for petroleum products & by-products and deepwater marine
facilities. There will be two jetties, able to accommodate 12-15 berths.
Magnet for downstream investments

With RAPID going live by year-end, the potential to develop a downstream hub at
Pengerang should be progressively realised. There is ample land next to RAPID
that can draw such investments. Location-wise, Pengerang will complement
Jurong Island’s existing downstream hub. Dialog’s facilities at Pengerang are
expected to facilitate this drive.
After Phase 3, Dialog should still have room to grow. It has up to 600 acres of
land at its existing workshop and onshore land, previously known as a buffer
zone, for future development. Based on market valuations, we estimate that the
600 acres are worth MYR784m-1.8b, assuming MYR30-70 psf. That translates into
MYR0.14-0.32/ share.
While the land has high, instant monetisation prospects, we believe developing it
to complement a downstream hub could generate even greater value. Ways could
include expanding storage facilities beyond Phase 3 or swapping the land for
equity for any downstream investments, provided the returns on investment are
enticing.
Dialog: 12-month forward P/E band Dialog: 12-month forward P/BV band
(x) (x)
45.0 9.0
40.0 8.0
+1sd: 32.6 7.0
35.0
30.0 Mean: 25.5 6.0 +1sd: 4.9
25.0 5.0
Mean: 3.9
20.0 -1sd: 18.5 4.0
15.0 3.0
10.0 2.0 -1sd: 2.9
5.0 1.0
0.0 0.0
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Jul-18
Jul-19
Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng
October 16, 2019 28

Dialog Group
Value Proposition Price Drivers

 Malaysia’s largest, most profitable and efficiently-run tank Historical share price trend
terminal operator with 5.5m m3 capacity. Its independent
E&P and O&G services are complementary businesses. 4.00 300
4 5
 Continues to focus on its tank terminal operations (which
3.50 260
are cash generative, stable and scalable) and strategic tie-
ups with PETRONAS. 3.00 220
 Commencement of new projects at Pengerang (regas, 2.50 180
dedicated terminals) in FY19 to contribute to a big jump 1 2
3
2.00 140
in earnings and expansion in return of capital against cost
of capital. 1.50 100
1.00 60
Aug-14 Aug-15 Aug-16 Aug-17 Aug-18
Malaysia’s tank terminal capacity & Dialog’s market share
Dialog Group - (LHS, MYR)
(cu m) (%) Dialog Group / Kuala Lumpur Composite Index - (RHS, %)

Capacity (LHS) Market share (RHS)
6,000,000 100
82
75 Source: Company, Maybank Kim Eng, Factset
5,000,000 67 67 80
64 65 65 65
4,000,000
60
3,000,000 1. The beginning of the fall in crude oil price to sub-
USD100/bbl.
1,776,000
2,343,000
2,343,000
2,343,000
2,343,000
2,343,000
3,543,000
5,373,000
40
2,000,000
2. To build, own and operate dedicated tank terminals for
1,000,000 20
PETRONAS’ RAPID project; secured MYR5.5b EPCC works.
- 0 3. Launches Pengerang Deepwater Terminals, Phase 3.
2014 2015 2016 2017 2018 2019F 2020F 2021F 4. Fully owns Dialog Terminals.
5. Kick starts Phase 3 with a 430k cu m dedicated storage
Source: Company, MKE terminal with BP (Singapore).
Financial Metrics Swing Factors

 ASP, capacity, throughput and opex are Dialog’s key Upside
earnings drivers for its tank terminal operations. Variation
in any of these parameters will impact profitability.  Rebound in crude oil prices will be a near-term share
 Earnings growth is strong from FY17 as focus is on the price driver.
development at Pengerang operations and M&A activities.  New tank terminal contracts will be a catalyst to
 Low net gearing level with consistent dividends, atypical sentiment and NAV.
in the O&G services industry.  Special/higher dividend payment serves as a potential
 Execution of the planned tank terminal and regasification positive.
facilities will drive future earnings growth from FY18.
Net gearing and FCF trend

Downside
(%) FCF (RHS) Net gearing (LHS) (MYR'm)
15 600  Further weakness in oil/gas price will hurt absolute share
12 500 price performance.
 Execution delay/failure of new, planned tank terminal
9 400
facilities.
6 300  Ventures into new E&P assets/non-integrated operations
will not be well received particularly at this point of the
3 200
industry cycle.
0 100
FY16 FY17 FY18 FY19F FY20F FY21F
-3 0
Source: Company, MKE
tjliaw@maybank-ib.com
October 16, 2019 29

Dialog Group
FYE 30 Jun FY18A FY19A FY20E FY21E FY22E

Key Metrics
P/E (reported) (x) 28.0 34.0 32.9 30.9 26.9
Core P/E (x) 40.9 34.4 32.9 30.9 26.9
P/BV (x) 5.0 4.8 4.7 4.3 3.9
P/NTA (x) 5.4 5.4 5.1 4.7 4.2
FCF yield (%) 1.7 1.4 1.8 2.2 2.6
EV/EBITDA (x) 31.3 29.7 32.6 31.6 26.1
EV/EBIT (x) 38.3 37.0 40.9 39.3 31.9
INCOME STATEMENT (MYR m)

Revenue 3,110.6 2,386.5 2,587.8 2,629.7 2,814.2
Gross profit 438.7 417.1 482.9 507.0 653.0
EBITDA 569.9 650.0 632.5 654.4 794.1
Depreciation (104.1) (128.6) (128.6) (128.6) (145.9)
Amortisation 0.0 0.0 0.0 0.0 0.0
EBIT 465.9 521.4 504.0 525.9 648.2
Net interest income /(exp) (51.4) (49.4) (55.3) (54.2) (76.5)
Associates & JV 129.1 180.1 274.2 297.1 320.1
Exceptionals 84.5 0.9 0.0 0.0 0.0
Other pretax income 0.0 0.0 0.0 0.0 0.0
Pretax profit 628.1 653.0 723.0 768.7 891.8
Income tax (99.8) (100.7) (112.1) (119.2) (138.2)
Minorities (17.9) (16.5) (16.4) (16.5) (26.7)
Discontinued operations 0.0 0.0 0.0 0.0 0.0
Reported net profit 510.4 535.8 594.5 633.1 726.9
Core net profit 425.8 535.0 594.5 633.1 726.9
BALANCE SHEET (MYR m)

Cash & Short Term Investments 1,265.0 884.4 787.7 706.3 1,392.1
Accounts receivable 767.9 1,217.2 1,319.8 1,341.2 1,435.3
Inventory 92.4 95.6 103.7 105.3 112.7
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Property, Plant & Equip (net) 1,603.0 1,936.0 1,891.9 1,813.4 1,717.5
Intangible assets 288.4 364.2 364.2 364.2 364.2
Investment in Associates & JVs 2,043.2 2,137.5 2,661.7 3,208.8 3,778.9
Other assets 305.4 75.0 75.0 75.0 75.0
Total assets 6,365.2 6,709.8 7,204.0 7,614.2 8,875.7
ST interest bearing debt 377.5 356.2 350.0 350.0 350.0
Accounts payable 1,074.8 1,050.0 1,138.5 1,157.0 1,238.1
Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0
LT interest bearing debt 1,232.8 1,318.2 1,333.3 1,313.3 1,993.3
Other liabilities 81.0 78.0 78.0 78.0 78.0
Total Liabilities 2,765.8 2,802.1 2,899.6 2,898.1 3,659.2
Shareholders Equity 3,500.9 3,791.2 4,171.5 4,566.8 5,040.4
Minority Interest 98.5 116.5 132.9 149.4 176.1
Total shareholder equity 3,599.5 3,907.7 4,304.4 4,716.1 5,216.5
Total liabilities and equity 6,365.2 6,709.8 7,204.0 7,614.2 8,875.7
CASH FLOW (MYR m)

Pretax profit 628.1 653.0 723.0 768.7 891.8
Depreciation & amortisation 104.1 128.6 128.6 128.6 145.9
Adj net interest (income)/exp 0.0 0.0 0.0 0.0 0.0
Change in working capital (126.7) (269.6) (22.2) (4.6) (20.3)
Cash taxes paid (99.8) (100.7) (112.1) (119.2) (138.2)
Other operating cash flow (64.0) (77.0) (274.2) (297.1) (320.1)
Cash flow from operations 441.7 334.3 443.1 476.5 559.0
Capex (150.0) (73.1) (84.5) (50.0) (50.0)
Free cash flow 291.7 261.2 358.6 426.5 509.0
Dividends paid (164.1) (186.2) (214.3) (237.8) (253.2)
Equity raised / (purchased) 0.0 0.0 0.0 0.0 0.0
Change in Debt 186.6 64.1 9.0 (20.0) 680.0
Other invest/financing cash flow (474.5) (519.6) (250.0) (250.0) (250.0)
Effect of exch rate changes 0.0 1.0 0.0 0.0 0.0
Net cash flow (160.4) (379.6) (96.7) (81.3) 685.8
October 16, 2019 30

Dialog Group
FYE 30 Jun FY18A FY19A FY20E FY21E FY22E

Key Ratios
Growth ratios (%)
Revenue growth (8.3) (23.3) 8.4 1.6 7.0
EBITDA growth 37.4 14.0 (2.7) 3.5 21.3
EBIT growth 39.9 11.9 (3.3) 4.3 23.3
Pretax growth 40.0 4.0 10.7 6.3 16.0
Reported net profit growth 37.7 5.0 11.0 6.5 14.8
Core net profit growth 29.8 25.6 11.1 6.5 14.8
Profitability ratios (%)

EBITDA margin 18.3 27.2 24.4 24.9 28.2
EBIT margin 15.0 21.8 19.5 20.0 23.0
Pretax profit margin 20.2 27.4 27.9 29.2 31.7
Payout ratio 35.3 40.0 40.0 40.0 40.0
DuPont analysis
Net profit margin (%) 16.4 22.5 23.0 24.1 25.8
Revenue/Assets (x) 0.5 0.4 0.4 0.3 0.3
Assets/Equity (x) 1.8 1.8 1.7 1.7 1.8
ROAE (%) 15.4 14.7 14.9 14.5 15.1
ROAA (%) 7.0 8.2 8.5 8.5 8.8
Liquidity & Efficiency

Cash conversion cycle (49.0) (27.3) 6.4 5.2 (3.7)
Days receivable outstanding 89.0 149.7 176.5 182.1 177.6
Days inventory outstanding 11.9 17.2 17.0 17.7 18.2
Days payables outstanding 149.8 194.2 187.2 194.7 199.5
Dividend cover (x) 2.8 2.5 2.5 2.5 2.5
Current ratio (x) 1.6 1.5 1.4 1.4 1.8
Leverage & Expense Analysis

Asset/Liability (x) 2.3 2.4 2.5 2.6 2.4
Net gearing (%) (incl perps) 9.6 20.2 20.8 20.3 18.2
Net gearing (%) (excl. perps) 9.6 20.2 20.8 20.3 18.2
Net interest cover (x) 9.1 10.6 9.1 9.7 8.5
Debt/EBITDA (x) 2.8 2.6 2.7 2.5 3.0
Capex/revenue (%) 4.8 3.1 3.3 1.9 1.8
Net debt/ (net cash) 345.3 790.0 895.7 957.0 951.2
Source: Company; Maybank
October 16, 2019 31

7.31
October 16, 2019

Shariah Compliant
Petronas Chemicals (PCHEM MK)

BUY
Taking it to the next level Share Price
12m Price Target
MYR 7.31
MYR 8.40 (+15%)
PCHEM’s second biggest investment to date Company Description

Petronas Chemicals Group Bhd manufactures,
PCHEM’s exposure to PIPC is via its 50% share in PRPC Polymers. This will
markets, and sells petrochemicals.
contribute positively to the Group, but it will be gradual in tandem with
the ramp-up in utilisation rates and also the prevailing product margin.
PIPC’s progress is consistent with guidance and we make no changes to
our earnings forecast and TP of MYR8.40, which is pegged to a target Statistics
7.4x FY20 EV/EBITDA (1SD below mean) to factor in the uncertainty 52w high/low (MYR) 9.70/6.77
Materials
pertaining to US-China and contracting global manufacturing activities. 3m avg turnover (USDm) 9.9
Free float (%) na
PCHEM’s second biggest investment to date
PCHEM invested USD1,350m for its 50% share in PRPC Polymer. This capex USD14.0B
has been fully funded by internal cash. PCHEM’s nameplate capacity has Major shareholders:
grown by 15% to 14.6mt p.a from the 50% share of PRPC’s nameplate Government of Malaysia 64.4%
capacity of 3.6mt p.a. In terms of size, this is second only to PCHEM’s Employees Provident Fund 10.1%
USD1,500m investment in Projek SAMUR (1.5mt p.a.), a urea and Permodalan Nasional Bhd. 7.0%
ammonia plant that was completed in 2016.

Malaysia
Price Performance
More to come? 10.0 165
PCHEM has no stake in the naphtha cracker, which is odd given that it is 9.5 155
central to the production of petrochemicals. However, we understand 9.0 145

that PETRONAS decided to fund it due to the large investment required 8.5 135
(USD4,500m by our estimate). However, we forecast PCHEM’s FCF to rise
8.0 125
in the upcoming years due to the absence of sizable growth capex. We
7.5 115
don’t discount that PETRONAS could potentially sell a stake in the
naphtha cracker to PCHEM in the future. 7.0 105
6.5 95
Oct-17 Feb-18 Jun-18 Oct-18 Feb-19 Jun-19 Oct-19
Maintain BUY on attractive valuations Petronas Chem. - (LHS, MYR)
Petronas Chem. / Kuala Lumpur Composite Index - (RHS, %)
The upcoming 3Q19 looks rather bleak due to scheduled factory
shutdowns and also lower ASP. However, we think it is reflected in its -1M -3M -12M
price as PCHEM’s valuations are cheap relative to its x-year mean. Its 1- Absolute (%) (1) (11) (22)
year forward P/E, EV/EBITDA and P/BV are all trading below its historical Relative to index (%) 1 (5) (14)
mean. Source: FactSet
FYE Dec (MYR m) FY17A FY18A FY19E FY20E FY21E

Revenue 17,407 19,576 18,485 23,281 25,064
EBITDA 6,618 6,965 6,466 7,149 7,626
Core net profit 4,192 4,983 4,157 4,795 5,123
Core EPS (sen) 52.4 62.3 52.0 59.9 64.0
Core EPS growth (%) 31.7 18.9 (16.6) 15.4 6.8
Net DPS (sen) 27.0 32.0 26.0 30.0 33.0
Core P/E (x) 14.7 14.9 14.1 12.2 11.4
P/BV (x) 2.2 2.4 1.8 1.6 1.5
ROAE (%) 15.3 17.1 13.2 14.1 13.9
ROAA (%) 12.9 14.1 10.9 12.0 12.1
EV/EBITDA (x) 8.5 9.3 7.4 6.3 5.3
Net gearing (%) (incl perps) net cash net cash net cash net cash net cash
Consensus net profit - - 3,754 4,036 4,343
MKE vs. Consensus (%) - - 10.7 18.8 18.0
Mohshin Aziz
(603) 2297 8692
October 16, 2019 32

Petronas Chemicals
PCHEM’s valuation
PCHEM’s 1-year forward PER PCHEM’s 1-year forward EV/EBITDA
(x) (x)
30 12
25 11
10
20
9
15
8
10
7
5 6
0 5
2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019
Source: Bloomberg Source: Bloomberg

PCHEM’s P/BV PCHEM’s DY
(x) (%)
3.0 5
2.5 4
2.0 3
1.5 2
2012 2013 2014 2015 2016 2017 2018 2019 2012 2013 2014 2015 2016 2017 2018 2019
Source: Bloomberg Source: Bloomberg

LCT’s 1-year forward P/CF
(x)
15
13
11
5
2012 2013 2014 2015 2016 2017 2018 2019
Source: Bloomberg
October 16, 2019 33
Petronas Chemicals
Value Proposition Price Drivers

 Southeast Asia’s largest integrated gas-based chemicals Historical share price trend
4 5
producer with a nameplate capacity of 12.7 million tpa.
10.0 200
 Strong growth pipeline with three expansion projects that
9.0 3 180
will expand nameplate capacity by ~30% scheduled for 2
completion in 2019. 8.0 160
1
 The lowest cost petrochemical producer in Asia Pacific, 7.0 140
ensuring sustainable profits, by our estimate.
6.0 120
 Global PMI in contracting territory since May 2019.
5.0 100
However, this is enabling big players to edge out the
weaker companies in the battle for market share. 4.0 80
Oct-14 Oct-15 Oct-16 Oct-17 Oct-18
Petronas Chem. - (LHS, MYR)
Global Producer Manufacturer Index (PMI) Petronas Chem. / Kuala Lumpur Composite Index - (RHS, %)
55
Source: Company, FactSet, Maybank Kim Eng
54
53 1. Share price tracked the KLCI direction.

2. Reported consistent strong profit on better utilisation
52
rate and good cost control.
51 3. Share price continued to trend in-line with the general
market.
50
4. PCHEM delivered record profits.
49 5. Share price tumbled due to uncertainty from the US-
China trade tension escalation.
48
2011 2012 2013 2014 2015 2016 2017 2018 2019
Source: Bloomberg
Financial Metrics Swing Factors

 Consistent improvement in utilisation rates, management Upside
has enhanced maintenance practices and procedures.
 Higher utilisation will propel economies of scale as the  Start-up of new production facilities will generate more
fixed cost components are amortised over greater unit revenues and profits.
volume.  Unscheduled closure of major competitors’ production
 Sensitive to naphtha price movement, a 1% change in plants.
naphtha will move earnings by MYR50m (±1.2%)  Customers draw in and exhaust their inventories and look
for replenishment of supply.
PCHEM’s utilisation rate
95.7%
Downside
91.0%
92.0%  Sudden collapse in petrochemical spreads or extreme
volatility may have an adverse impact on earnings.
85.3%
 Unscheduled factory shutdowns that could materially
reduce utilisation rates and product volumes.
82.5%
 Further escalation of the US-China trade war that inhibits
79.8%
77.9% free movement of global trade.
76.1%
2011 2012 2013 2014 2015 2016 2017 2018
Source: Company
October 16, 2019 34

Petronas Chemicals
FYE 31 Dec FY17A FY18A FY19E FY20E FY21E

Key Metrics
P/E (reported) (x) 14.0 14.0 14.1 12.2 11.4
Core P/E (x) 14.7 14.9 14.1 12.2 11.4
P/BV (x) 2.2 2.4 1.8 1.6 1.5
P/NTA (x) 2.2 2.4 1.8 1.6 1.5
FCF yield (%) 3.0 5.0 6.0 9.9 12.7
EV/EBITDA (x) 8.5 9.3 7.4 6.3 5.3
EV/EBIT (x) 10.7 11.7 9.4 7.5 6.4

Revenue 17,407.0 19,576.0 18,485.2 23,281.2 25,063.5
Gross profit 6,386.0 6,874.0 6,536.6 7,588.5 8,002.1
EBITDA 6,618.0 6,965.0 6,466.1 7,148.8 7,625.6
Depreciation (1,589.0) (1,619.0) (1,782.1) (2,035.0) (2,212.5)
Amortisation 0.0 0.0 0.0 0.0 0.0
EBIT 5,240.0 5,559.0 5,105.9 5,957.8 6,257.1
Associates & JV 16.0 108.0 84.0 114.0 144.0
Exceptionals 0.0 0.0 0.0 0.0 0.0
Pretax profit 5,236.0 5,650.0 5,169.5 6,047.3 6,371.7
Income tax (822.0) (592.0) (775.4) (907.1) (955.8)
Minorities (237.0) (79.0) (237.3) (345.0) (292.5)
Reported net profit 4,177.0 4,979.0 4,156.8 4,795.2 5,123.5
Core net profit 4,192.0 4,983.0 4,156.8 4,795.2 5,123.5

Cash & Short Term Investments 6,674.0 12,329.0 13,023.1 15,679.7 19,707.3
Accounts receivable 2,370.0 2,668.0 1,792.3 2,353.9 2,559.2
Inventory 1,723.0 1,698.0 1,672.8 2,197.0 2,388.6
Reinsurance assets 0.0 0.0 0.0 0.0 0.0
Investment in Associates & JVs 1,234.0 1,260.0 1,933.0 1,933.0 1,933.0
Other assets 468.0 330.0 295.0 295.0 295.0
Total assets 33,262.0 37,365.0 38,850.1 41,357.4 43,569.4
ST interest bearing debt 0.0 2,072.0 1,372.0 672.0 0.0
Accounts payable 3,217.0 2,896.0 2,464.7 3,104.2 3,341.8
Insurance contract liabilities 0.0 0.0 0.0 0.0 0.0
LT interest bearing debt 0.0 0.0 606.0 606.0 606.0
Other liabilities 1,177.0 1,223.0 970.0 798.0 669.0
Minority Interest 1,084.8 776.8 725.8 725.8 725.8
CASH FLOW (MYR m)

Pretax profit 5,236.0 5,650.0 5,169.5 6,047.3 6,371.7
Depreciation & amortisation 1,589.0 1,619.0 1,782.1 2,035.0 2,212.5
Adj net interest (income)/exp (191.0) (298.0) (396.9) (417.7) (438.6)
Change in working capital (907.0) (224.0) 469.6 (446.3) (159.3)
Cash taxes paid (617.0) (443.0) (775.4) (907.1) (955.8)
Other operating cash flow 623.0 502.0 691.4 793.1 811.8
Cash flow from operations 5,311.0 6,667.0 6,371.0 6,618.2 8,200.6
Capex (3,446.0) (2,957.0) (2,836.0) (800.0) (800.0)
Free cash flow 1,865.0 3,710.0 3,535.0 5,818.2 7,400.6
Dividends paid (2,474.0) (2,320.0) (2,080.0) (2,400.0) (2,640.3)
Change in Debt (78.0) 3,003.0 (756.0) (756.0) (728.0)
Other invest/financing cash flow 83.0 1,074.0 0.0 0.0 0.0
Effect of exch rate changes (125.0) (5.0) (5.0) (5.0) (5.0)
Net cash flow (729.0) 5,462.0 694.0 2,657.2 4,027.3
October 16, 2019 35

Petronas Chemicals

Key Ratios
Growth ratios (%)
Revenue growth 25.6 12.5 (5.6) 25.9 7.7
EBITDA growth 25.1 5.2 (7.2) 10.6 6.7
EBIT growth 29.5 6.1 (8.2) 16.7 5.0
Pretax growth 27.4 7.9 (8.5) 17.0 5.4
Reported net profit growth 42.5 19.2 (16.5) 15.4 6.8
Core net profit growth 31.7 18.9 (16.6) 15.4 6.8

EBITDA margin 38.0 35.6 35.0 30.7 30.4
EBIT margin 30.1 28.4 27.6 25.6 25.0
Payout ratio 51.7 51.4 50.0 50.0 51.5
DuPont analysis
Revenue/Assets (x) 0.5 0.5 0.5 0.6 0.6
Assets/Equity (x) 1.2 1.2 1.2 1.2 1.1
ROAE (%) 15.3 17.1 13.2 14.1 13.9
ROAA (%) 12.9 14.1 10.9 12.0 12.1

Cash conversion cycle 13.9 8.2 13.5 12.6 15.7
Dividend cover (x) 1.9 1.9 2.0 2.0 1.9
Current ratio (x) 3.2 3.3 4.1 5.2 7.1

Net gearing (%) (incl perps) net cash net cash net cash net cash net cash
Net gearing (%) (excl. perps) net cash net cash net cash net cash net cash
Net interest cover (x) nm nm nm nm nm
Debt/EBITDA (x) 0.0 0.3 0.3 0.2 0.1
Capex/revenue (%) 19.8 15.1 15.3 3.4 3.2
Net debt/ (net cash) (6,674.0) (10,257.0) (11,045.1) (14,401.7) (19,101.3)
October 16, 2019 36

16.58
October 16, 2019

Shariah Compliant
Petronas Gas (PTG MK)

HOLD
Playing a part Share Price
12m Price Target
MYR 16.58
MYR 16.80 (+1%)
Earnings resetting Company Description

Petronas Gas is the gas infrastructure arm of national
PTG’s primary exposure to the Pengerang Integrated Complex (PIC) is via
oil company PETRONAS.
its 65% stake in the 3.5mt regasification facility. It also has an Air
Separation joint venture in the PIC, and could potentially in our view
take a stake in the Pengerang cogeneration plant in future. Presently,
the investment thesis revolves primarily around its declining earnings Statistics
trajectory as transportation tariffs are reset. Maintain HOLD with a 52w high/low (MYR) 19.54/15.36
MYR16.80 TP. 3m avg turnover (USDm) 2.3
Utilities
Free float (%) 39.0

Main exposure through regasification
The Pengerang regasification facility was commissioned in late 2017 at a USD7.8B
cost of MYR2.7b. We estimate PTG presently derives c.MYR500m of Major shareholders:
revenue and c.MYR300m of EBIT annually from the facility. Note that Government of Malaysia 60.7%
regasification tariffs are now regulated following the implementation of Employees Provident Fund 13.6%
Third-Party Access, and will thus be subjected to changes upon review of Permodalan Nasional Bhd. 7.7%
regulatory terms.
Malaysia
Price Performance
More to come? 20.0 135
19.5 130
PTG also has a 51% stake in a joint venture with Linde Malaysia for an Air
19.0 125
Separation Unit (ASU) in the PIC. Costing USD172m, the recently- 18.5 120
commissioned ASU will be the sole supplier of industrial gases in the PIC, 18.0 115
potentially contributing c.MYR20m of JV income to PTG annually. Longer 17.5 110

17.0 105
term, we do not rule out the possibility of PTG acquiring a stake in the
16.5 100
Pengerang Cogeneration Plant from parent PETRONAS. PTG already 16.0 95
operates cogeneration plants through its utilities division, and there is 15.5 90
ample balance sheet roomfor acquisitions. 15.0
Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
85
Petronas Gas - (LHS, MYR)
Maintain HOLD Petronas Gas / Kuala Lumpur Composite Index - (RHS, %)
Our DCF based TP of MYR16.80 assumes a 7.2% WACC and 2% LT growth. -1M -3M -12M
Our earnings forecasts have already incorporated three step-downs of Absolute (%) 2 (4) (9)
PTG’s transportation tariffs in 2020, 2023 and 2026 respectively. Note Relative to index (%) 4 3 0
that regulatory details pertaining to WACC and asset values have not Source: FactSet
been announced.
FYE Dec (MYR m) FY17A FY18A FY19E FY20E FY21E

Revenue 4,810 5,498 5,455 5,253 5,269
EBITDA 3,171 3,610 3,613 3,447 3,447
Core net profit 1,778 1,950 1,979 1,876 1,911
Core EPS (sen) 89.8 98.5 100.0 94.8 96.6
Core EPS growth (%) 1.7 9.7 1.5 (5.2) 1.9
Net DPS (sen) 66.0 72.0 70.0 66.4 67.6
Core P/E (x) 19.5 19.5 16.6 17.5 17.2
P/BV (x) 2.8 2.9 2.4 2.3 2.2
ROAE (%) 14.6 14.2 14.9 13.5 13.3
ROAA (%) 10.4 10.8 10.5 9.7 9.5
EV/EBITDA (x) 11.2 10.5 9.0 9.2 9.0
Net gearing (%) (incl perps) 4.6 net cash net cash net cash net cash
Consensus net profit - - 1,844 1,816 1,829
MKE vs. Consensus (%) - - 7.3 3.3 4.5
Tan Chi Wei, CFA

chiwei.t@maybank-ib.com
(603) 2297 8690
October 16, 2019 37

Petronas Gas
Risk statement
There are several risk factors for our earnings estimates, price target, and rating
for Petronas Gas. Regulatory developments, such as the determination of
regulated returns, have direct impact on earnings. Unscheduled outages could
also result in loss of earnings for Petronas Gas.
October 16, 2019 38

Petronas Gas

Key Metrics
P/E (reported) (x) 20.8 20.0 16.6 17.5 17.2
Core P/E (x) 19.5 19.5 16.6 17.5 17.2
P/BV (x) 2.8 2.9 2.4 2.3 2.2
P/NTA (x) 2.8 2.9 2.4 2.3 2.2
FCF yield (%) 2.9 6.0 6.0 6.0 6.2
EV/EBITDA (x) 11.2 10.5 9.0 9.2 9.0
EV/EBIT (x) 16.3 15.4 13.0 13.7 13.3

Revenue 4,809.6 5,498.1 5,455.5 5,252.7 5,269.0
Gross profit 2,127.7 2,551.1 2,531.3 2,437.2 2,444.8
EBITDA 3,170.8 3,610.0 3,613.3 3,447.2 3,447.2
Depreciation (992.4) (1,136.8) (1,124.3) (1,122.1) (1,111.1)
Amortisation 0.0 0.0 0.0 0.0 0.0
EBIT 2,178.5 2,473.2 2,489.0 2,325.2 2,336.1
Associates & JV 87.8 (49.3) 172.8 178.3 183.2
Exceptionals 15.1 (15.2) 0.0 0.0 0.0
Pretax profit 2,252.7 2,351.9 2,606.9 2,472.9 2,516.6
Income tax (435.8) (443.7) (535.5) (504.8) (513.3)
Minorities (24.3) (97.9) (92.2) (92.2) (92.2)
Reported net profit 1,792.7 1,810.3 1,979.3 1,875.9 1,911.1
Core net profit 1,777.6 1,949.7 1,979.3 1,875.9 1,911.1

Cash & Short Term Investments 2,500.4 3,616.0 4,228.6 4,922.5 5,695.5
Accounts receivable 834.0 942.2 941.6 906.6 909.4
Inventory 66.7 66.7 64.1 61.7 61.9
Investment in Associates & JVs 754.4 695.8 792.8 892.5 994.7
Other assets 569.4 611.6 611.6 611.6 611.6
Total assets 17,627.5 18,424.0 19,106.2 19,740.4 20,407.5
ST interest bearing debt 105.3 94.2 94.2 94.2 94.2
Accounts payable 610.3 564.5 560.8 540.0 541.6
LT interest bearing debt 2,978.9 3,232.8 3,232.8 3,232.8 3,232.8
Other liabilities 1,171.0 1,184.0 1,184.0 1,184.0 1,184.0
Minority Interest 247.4 376.5 468.7 560.9 653.0
CASH FLOW (MYR m)

Pretax profit 2,252.7 2,351.9 2,606.9 2,472.9 2,516.6
Depreciation & amortisation 992.4 1,136.8 1,124.3 1,122.1 1,111.1
Adj net interest (income)/exp 28.6 56.8 55.0 30.5 2.7
Change in working capital (517.0) (29.7) (0.6) 16.5 (1.3)
Cash taxes paid (359.2) (386.7) (535.5) (504.8) (513.3)
Other operating cash flow 450.7 69.5 (172.8) (178.3) (183.2)
Cash flow from operations 2,848.2 3,198.6 3,077.2 2,958.9 2,932.5
Capex (1,846.0) (916.1) (1,100.0) (1,000.0) (900.0)
Free cash flow 1,002.2 2,282.5 1,977.2 1,958.9 2,032.5
Dividends paid (1,306.0) (1,365.3) (1,385.5) (1,313.2) (1,337.7)
Change in Debt 1,108.9 172.4 0.0 0.0 0.0
Other invest/financing cash flow (67.2) 28.3 20.8 48.1 78.2
Effect of exch rate changes 0.0 0.0 0.0 0.0 0.0
Net cash flow 737.9 1,117.8 612.6 693.9 773.0
October 16, 2019 39

Petronas Gas

Key Ratios
Growth ratios (%)
Revenue growth 5.4 14.3 (0.8) (3.7) 0.3
EBITDA growth 6.8 13.9 0.1 (4.6) (0.0)
EBIT growth 4.2 13.5 0.6 (6.6) 0.5
Pretax growth 6.9 4.4 10.8 (5.1) 1.8
Reported net profit growth 3.1 1.0 9.3 (5.2) 1.9
Core net profit growth 1.7 9.7 1.5 (5.2) 1.9

EBITDA margin 65.9 65.7 66.2 65.6 65.4
EBIT margin 45.3 45.0 45.6 44.3 44.3
Payout ratio 72.8 78.7 70.0 70.0 70.0
DuPont analysis
Revenue/Assets (x) 0.3 0.3 0.3 0.3 0.3
Assets/Equity (x) 1.4 1.4 1.4 1.4 1.4
ROAE (%) 14.6 14.2 14.9 13.5 13.3
ROAA (%) 10.4 10.8 10.5 9.7 9.5

Cash conversion cycle (41.6) (5.5) 0.9 1.0 1.0
Dividend cover (x) 1.4 1.3 1.4 1.4 1.4
Current ratio (x) 4.8 7.0 8.0 9.3 10.5

Net gearing (%) (incl perps) 4.6 net cash net cash net cash net cash
Net gearing (%) (excl. perps) 4.6 net cash net cash net cash net cash
Net interest cover (x) 76.0 43.6 45.3 76.3 nm
Debt/EBITDA (x) 1.0 0.9 0.9 1.0 1.0
Capex/revenue (%) 38.4 16.7 20.2 19.0 17.1
Net debt/ (net cash) 583.9 (289.1) (901.7) (1,595.6) (2,368.6)
October 16, 2019 40

Strategy Research
Research Offices
MACRO REGIONAL EQUITIES SINGAPORE THAILAND
Sadiq CURRIMBHOY Anand PATHMAKANTHAN Neel SINHA Head of Research Maria LAPIZ Head of Institutional Research
Head of Regional Macro Research Head of Regional Equity Research (65) 6231 5838 neelsinha@maybank-ke.com.sg Dir (66) 2257 0250 | (66) 2658 6300 ext 1399
(65) 6231 5836 (603) 2297 8783 • Strategy • Industrials Maria.L@maybank-ke.co.th
sadiq@maybank-ke.com.sg anand.pathmakanthan@maybank-ib.com • SMID Caps – Regional • Strategy • Consumer • Materials • Services
CHUA Su Tye Teerapol Udomvej, CFA

ECONOMICS WONG Chew Hann, CA (66) 2658 6300 ext 1394
Head of ASEAN Equity Research (65) 6231 5842 chuasutye@maybank-ke.com.sg
Suhaimi ILIAS • REITs teerapol.U@maybank-ke.co.th
(603) 2297 8686 • Healthcare
Chief Economist wchewh@maybank-ib.com
Malaysia | Philippines | China Luis HILADO Jesada Techahusdin, CFA
(603) 2297 8682 (65) 6231 5848 luishilado@maybank-ke.com.sg (66) 2658 6300 ext 1395
ONG Seng Yeow • Telcos • Transport
suhaimi_ilias@maybank-ib.com jesada.t@maybank-ke.co.th
Research, Technology & Innovation
LAI Gene Lih, CFA • Banking & Finance
CHUA Hak Bin (65) 6231 5839
ongsengyeow@maybank-ke.com.sg (65) 6231 5832 laigenelih@maybank-ke.com.sg Ekachai TARAPORNTIP Head of Retail Research
Regional Thematic Macroeconomist
• Technology • Healthcare (66) 2658 5000 ext 1530
(65) 6231 5830
MALAYSIA Ekachai.t@maybank-ke.co.th
chuahb@maybank-ke.com.sg Thilan WICKRAMASINGHE
Sutthichai KUMWORACHAI Deputy Head
Anand PATHMAKANTHAN, Head of Research (65) 6231 5840 thilanw@maybank-ke.com.sg (66) 2658 5000 ext 1400
LEE Ju Ye • Banks • Consumer
Singapore | Thailand (603) 2297 8783 sutthichai.k@maybank-ke.co.th
(65) 6231 5844 anand.pathmakanthan@maybank-ib.com • Energy • Petrochem
• Strategy SZE Jia Min
leejuye@maybank-ke.com.sg (65) 6231 5845 jiamin@maybank-ke.com.sg Surachai PRAMUALCHAROENKIT
Desmond CH’NG, ACA • Consumer (66) 2658 5000 ext 1470
Linda LIU Surachai.p@maybank-ke.co.th
Singapore | Vietnam (603) 2297 8680
desmond.chng@maybank-ib.com INDIA • Auto • Conmat • Contractor • Steel
(65) 6231 5847 Suttatip PEERASUB
lindaliu@maybank-ke.com.sg • Banking & Finance Jigar SHAH Head of Research (66) 2658 5000 ext 1430
(91) 22 4223 2632 jigar@maybank-ke.co.in suttatip.p@maybank-ke.co.th
Dr Zamros DZULKAFLI LIAW Thong Jung
(603) 2297 8688 tjliaw@maybank-ib.com • Strategy • Oil & Gas • Automobile • Cement • Media • Commerce
(603) 2082 6818
zamros.d@maybank-ib.com • Oil & Gas Services- Regional Termporn TANTIVIVAT
Neerav DALAL
(66) 2658 5000 ext 1520
ONG Chee Ting, CA (91) 22 4223 2606 neerav@maybank-ke.co.in termporn.t@maybank-ke.co.th
Ramesh LANKANATHAN
(603) 2297 8685 (603) 2297 8678 ct.ong@maybank-ib.com • Software Technology • Telcos • Property
ramesh@maybank-ib.com • Plantations - Regional
Jaroonpan WATTANAWONG
Vishal PERIWAL
(66) 2658 5000 ext 1404
William POH Mohshin AZIZ (91) 22 4223 2605 jaroonpan.w@maybank-ke.co.th
(603) 2297 8683 (603) 2297 8692 mohshin.aziz@maybank-ib.com vishalperiwal@maybank-ke.co.in • Transportation • Small cap
william.poh@maybank-ib.com • Aviation - Regional • Petrochem
• Infrastructure Thanatphat SUKSRICHAVALIT
YIN Shao Yang, CPA (66) 2658 5000 ext 1401
FX (603) 2297 8916 samuel.y@maybank-ib.com
Kshitiz PRASAD thanaphat.s@maybank-ke.co.th
• Gaming – Regional • Media (91) 22 4223 2607 • Media • Electronics
Saktiandi SUPAAT
kshitiz@maybank-ke.co.in Sorrabhol VIRAMETEEKUL
Head of FX Research
(65) 6320 1379 TAN Chi Wei, CFA • Banks Head of Digital Research
saktiandi@maybank.com.sg (603) 2297 8690 chiwei.t@maybank-ib.com (66) 2658 5000 ext 1550
• Power • Telcos INDONESIA sorrabhol.V@maybank-ke.co.th
Christopher WONG • Food, Transportation
(65) 6320 1347 WONG Wei Sum, CFA Isnaputra ISKANDAR Head of Research
(603) 2297 8679 weisum@maybank-ib.com (62) 21 8066 8680 Wijit ARAYAPISIT
wongkl@maybank.com.sg (66) 2658 5000 ext 1450
• Property isnaputra.iskandar@maybank-ke.co.id
• Strategy • Metals & Mining • Cement wijit.a@maybank-ke.co.th
Tan Yanxi • Strategist
(65) 6320 1378 LEE Yen Ling • Autos • Consumer • Utility
tanyx@maybank.com.sg (603) 2297 8691 lee.yl@maybank-ib.com Rahmi MARINA Kritsapong PATAN
• Glove • Ports • Shipping • Healthcare (62) 21 8066 8689 (66) 2658 5000 ext 1310
Fiona LIM rahmi.marina@maybank-ke.co.id kritsapong.p@maybank-ke.co.th
(65) 6320 1374 Ivan YAP • Chartist
• Banking & Finance
fionalim@maybank.com.sg (603) 2297 8612 ivan.yap@maybank-ib.com
• Automotive • Semiconductor • Technology Aurellia SETIABUDI VIETNAM
(62) 21 8066 8691
STRATEGY LE Hong Lien, ACCA
Kevin WONG aurellia.setiabudi@maybank-ke.co.id
Willie CHAN (603) 2082 6824 kevin.wong@maybank-ib.com • Property Head of Institutional Research
Regional • REITs • Consumer Discretionary (84 28) 44 555 888 x 8181
Luthfi RIDHO
(852) 2268 0631 lien.le@maybank-kimeng.com.vn
(62) 21 8066 8690
williechan@kimeng.com.hk Adrian WONG, CFA • Strategy • Consumer • Diversified
luthfi.ridho@maybank-ke.co.id
(603) 2297 8675 adrian.wkj@maybank-ib.com • Macro/Strategy LE Nguyen Nhat Chuyen
Anand PATHMAKANTHAN • Constructions • Building Materials
(84 28) 44 555 888 x 8082
ASEAN
Jade TAM
PHILIPPINES chuyen.le@maybank-kimeng.com.vn
(603) 2297 8783 • Oil & Gas
anand.pathmakanthan@maybank-ib.com (603) 2297 8687 jade.tam@maybank-ib.com Minda OLONAN Head of Research
• Consumer Staples (63) 2 8849 8840 QUAN Trong Thanh
FIXED INCOME minda_olonan@maybank-atrke.com (84 28) 44 555 888 x 8184
TEE Sze Chiah Head of Retail Research • Strategy • Conglomerates thanh.quan@maybank-kimeng.com.vn
Winson PHOON, ACA (603) 2082 6858 szechiah.t@maybank-ib.com • Banks
Katherine TAN
(65) 6812 8807
Nik Ihsan RAJA ABDULLAH, MSTA, CFTe (63) 2 8849 8843 NGUYEN Thi Ngan Tuyen
winsonphoon@maybank-ke.com.sg
(603) 2297 8694 kat_tan@maybank-atrke.com Head of Retail Research
nikmohdihsan.ra@maybank-ib.com • Banks • Conglomerates • Ports (84 28) 44 555 888 x 8081
Se Tho Mun Yi
(603) 2074 7606 • Chartist tuyen.nguyen@maybank-kimeng.com.vn
Luis HILADO • Food & Beverage • Oil&Gas • Banking
munyi.st@maybank-ib.com (65) 6231 5848 luishilado@maybank-ke.com.sg
Amirah AZMI
• Telcos TRUONG Quang Binh
(603) 2082 8769 amirah.azmi@maybank-ib.com Deputy Head of Retail Research
• Retail Research Romel LIBO-ON (84 28) 44 555 888 x 8087
(63) 2 8849 8844 binh.truong@maybank-kimeng.com.vn
romel_libo-on@maybank-atrke.com • Rubber Plantation • Tyres & Tubes • Oil & Gas
• Property
TRINH Thi Ngoc Diep
Kayzer LLANDA (84 28) 44 555 888 x 8208
(63) 2 8849 8839 diep.trinh@maybank-kimeng.com.vn
Kayzer_llanda@maybank-atrke.com • Technology • Utilities • Construction
• Utilities
NGUYEN Thi Sony Tra Mi
(84 28) 44 555 888 x 8084
mi.nguyen@maybank-kimeng.com.vn
• Port Operation • Pharmaceutical
• Food & Beverage
NGUYEN Thanh Lam
(84 28) 44 555 888 x 8086
thanhlam.nguyen@maybank-kimeng.com.vn
• Technical Analysis
October 16, 2019 41

Strategy Research
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Strategy Research
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October 16, 2019 43

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October 16, 2019 44

Pengerang Integrated Petroleum Complex (PIPC) : Malaysia Thematic

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October 16, 2019

will contribute MYR8.5b pa to Malaysia’s GDP at operating capacity. Our

Potential impact on Malaysia

Buy Dialog and PCHEM; HOLD PTG

2. PIPC’s facilities ...................................................................................................................... 9

3. PIPC’s competitive advantages ................................................................................................... 17

4. Feasibility analysis .................................................................................................................. 18

5. Economic impact on Malaysia .................................................................................................... 21

6. What we think will happen ....................................................................................................... 22

7. Comparison of PIPC to Singapore ................................................................................................ 24

Dialog Group (DLG MK) ................................................................................................................... 27

Petronas Chemicals (PCHEM MK) ....................................................................................................... 32

Petronas Gas (PTG MK) ................................................................................................................... 37

October 16, 20199 2

1.2 Why Pengerang was chosen

Pengerang is sparsely populated, which helps to reduce environmental pushback

Figure 2: Transportation links to Pengerang

October 16, 20199 3

1.3 PIPC objectives

(i) Attain self-sufficiency for crude-oil refining

Hengyuan 156 1963 Light sweet

Petronas Melaka 1 120 1994 Light sweet 600

Sub-total 604 200

Fig 5 shows the quantum of refined petroleum products imported by Malaysia

Figure 5: Malaysia’s refined petroleum product imports

Petrol Diesel Others TOTAL

Sources: Department of Statistics Malaysia, Maybank KE

We forecast that Malaysia will enjoy near-complete import substitution of refined

(ii) Comply with environmental regulations

Figure 6: Malaysia’s fuel standard framework

Existing refineries in Malaysia are racing to upgrade their facilities in order to

October 16, 20199 5

Figure 7: Regulatory fuel standards equivalent to Euro standards

(iii) Develop downstream petrochemical business

Figure 8: RAPID petrochemical complex schematics

October 16, 20199 6

1.4 Impact on Pengerang district

This sudden spurt of population growth bumped up real-estate rentals, which

Figure 9: Population census of Pengerang district and forward projections

2000 2010 Height of construction 2020F

Sources: Department of Statistics Malaysia, Johor State Government

October 16, 20199 7

Figure 10: Housing developments launched at Pengerang

Bukit Pelali Escadia, Bandar Penawar Sebana Cove integrated township

Sources: Respective company websites

Figure 11: Pengerang’s strategic location

Source: Yusuf Ishak Institute

October 16, 20199 8

October 16, 20199 9

Figure 12: PIPC’s facilities

Air 220 kbpd Diesel, 88 kbpd

Crude oil refinery

LPG, condensates Naphtha Petrochemicals

electricity + process steam

waste RAPID Project

Peninsular Gas Unit National grid Johor water authority Import

* ARDS = atmospheric residue desulphurisation unit

October 16, 20199 10

Figure 13: PIPC’s components