The expansion of its butadiene plant will enlarge the plant's production capacity from 100,000 tons to 137,000 tons per year. This project will require USD $42 million in investment. South Korea-based engineering firm Toyo Engineering Korea Limited (Toyo-Korea) and its Indonesian unit Inti Karya Persada Tehnik were awarded the engineering, procurement and construction (EPC) contract for this project. The project should be completed in the second quarter of 2018.

Meanwhile, Chandra Asri Petrochemical is nearing completion of its new Michelin-licensed synthetic rubber manufacturing plant. The plant is being developed by Synthetic Rubber Indonesia, a joint venture of Michelin and Chandra Asri Petrochemical. It will use butadiene feedstock produced by Petrokimia Butadiene Indonesia, a subsidiary of Chandra Asri Petrochemical, to deliver up to 120,000 tons of solution styrene butadiene rubber per year. The plant is set to become operational in the first quarter of 2018.

Regarding the coal gasification plant, Chandra Asri Petrochemical has just signed a Heads of Agreement in early December 2017 with coal producer Tambang Batubara Bukit Asam, state-owned energy company Pertamina, and state-owned fertilizer company Pupuk Indonesia. Under the agreement, coal will be developed into gas (gasification) before further processed into value-added end products, such as synthetic gas or syngas. The plant should become operational by 2022.

Lastly, Chandra Asri Petrochemical is still studying its plan to expand its second petrochemical plant. The company would like to enlarge production capacity to 1 million tons per year (which is estimated to require about USD $4 - 5 billion in investment). By late-2019 Chandra Asri Petrochemical is expected to take a decision on this project. However, considering it has already established a new subsidiary (Chandra Asri Perkasa) for this project, Chandra Asri Petrochemical shows that it is serious about realizing the project.

These four projects all require massive funds. In 2018 and 2019 Chandra Asri Petrochemical is estimated to raise its capital expenditure budget to USD $398 million and USD $534 million, respectively, from USD $253 million in 2017.

It also taps the capital market in order to assemble the necessary funds. In early November Chandra Asri Petrochemical raised USD $300 million from seven non-call four bonds with a 4.95 percent coupon rate. Meanwhile, in mid-December 2017 it listed its IDR 500 billion (approx. USD $37 million) Sustainable Bond I Phase I Year 2017, part of a triple-tranche bond issuance.

Future Forecast Chandra Asri Petrochemical's Financial Highlights:

    2015   2016  2017F  2018F  2019F
Revenues 1,378 1,930 2,290 2,376 2,578
Net Income   26  300  349  346  346
EBITDA  143  499  569  568  569

in million US dollar
Source: BCA Sekuritas (22/12/2017)

In the January-September 2017 period Chandra Asri Petrochemical's sales rose 28.6 percent (y/y) to USD $1.79 billion, while its net profit rose 15.8 percent (y/y) to USD $250.6 million.

BCA Sekuritas said it keeps its outlook for Chandra Asri Petrochemical at "positive" due to the following factors: (1) the company's expansion plans, (2) its strong position vis-a-vis its competitors, and (3) stable crude oil prices.

However, regarding Chandra Asri Petrochemical's shares, BCA Sekuritas kept its "hold recommendation". On Friday (23/12) shares of Chandra Asri Petrochemical fell 0.89 percent to IDR 5,550 a piece.

Stock Quote Chandra Asri Petrochemical - TPIA: