Titan revives listing plan

Malaysian petrochemicals company mandates IPO.

Titan Petrochemicals and Polymers, Malaysia's largest privately owned petrochemicals company has mandated Goldman Sachs for a listing on the Kuala Lumpur Stock Exchange. The US investment bank is said to have beaten off three other banks during bake-offs - HSBC, JPMorgan and Nomura.

The flotation is expected to top $200 million and is scheduled for completion next year. It represents the second time Titan has attempted to list in Malaysia. Having first won approval back in 1998, the group was forced to put its plans on hold because of the financial crisis.

Indeed, it ended up in a debt restructuring after the industry cycle turned in 2000 and in May 2001, secured an extension from creditors Bank of Nova Scotia, JPMorgan, Malayan Banking Berhad and RHB Bank. Under the terms of the agreement, Titan could defer principal payments on an $840 million 10-year loan that was taken out in August 1997 until February 2003.

The company is owned by Chao Group International of Taiwan, which holds a 53.2% stake and also owns Westlake Corp, an unlisted Petrochemicals group based in the US. Permodalan Nasional Berhad (PNB), Malaysia's largest investment holding company and unit trust manager, holds a further 45.5% and China's Sinochem the remaining 1.3%.

Titan specialises in naptha cracker processing and operates two naptha cracker and five polymer plants. Last year, it produced about 630,000 tonnes of polyethylene products and 370,000 tonnes of polypropylene products, but expects demand to double over the next three years.

Company officials have described Titan as Asia's second largest single-site polyolefin producer and having invested M$5.5 billion ($1.45 billion) in its Johor-based facilities, the company also now ranks as the largest investor in the southern state.

Analysts believe that the company has picked an optimal time to list as the sector is on an upswing and the company should be able to secure a more aggressive valuation. Titan currently has a roughly 60% market share of the domestic polypropylene sector and exports to China, the Philippines, Singapore, Indonesia and India among others.

Analysts suggest that capacity increases in China will be the swing factor that determines the peak of the next cycle. However, as UBS wrote in a recent research report, "We are still bullish on the petrochemical sector as we expect demand and supply to tighten through mid-2005."

And it went on to add, "Delays are likely in several projects under construction such as those in the Middle East, even though we do not expect too much delay from China. Should the delays be longer than we anticipate and economic growth stronger than expected, we believe we could experience a much longer upturn than in previous cycles."

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