This article first appeared in The Edge Financial Daily on October 5, 2017 - October 11, 2017

Lotte Chemical Titan Holding Bhd
(Oct 4, RM5.07)
Maintain buy call with a target price of RM7.85: The Department of Environment (DOE) had on Sunday issued a stop-work order for Lotte Chemical Titan Holding Bhd’s (LCT) KBR Catalytic Olefins Technology catalytic cracking reactor within its TE3 project to mitigate and reduce odour emission and eliminate surface oil sheen/film discharge. Management is confident it will resolve this issue soon and the commercial commencement of TE3 remains on track for fourth quarter of 2017.

To reiterate, TE3 has yet to be connected to LCT’s core operations in its Pasir Gudang (Johor) plant as it is undergoing a commissioning process. DOE’s stop-work order will require extra days before TE3 can start. LCT could also incur some additional pre-operating expenses due to the delays.

The stop-work order is specific to TE3 and there is no impact to core operations. LCT should not be losing any production volumes due to this TE3 stop-work order.

This is the second unexpected challenge in over two weeks that the TE3 faced after a fire on Sept 20 burnt cables. The company said the cost of repairs should not exceed RM50,000. There were also no injuries and fatalities due to the fire.

Management is confident that it will resolve this latest stop-work order within a matter of days as it is formulating an alternative remedial plan that should satisfy the DOE. — MaybankIB Research, Oct 3