Asia Plus recommends buying SCC with a target price of 310 baht, eyes SCGC-PTTGC Synergy JV

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Summary · why it matters

Asia Plus Securities recommends buying SCC shares with a fair value of 310 baht, noting that SCGC and PTTGC have made progress in establishing a Strategic JV in the olefins and polyolefins business. They have reached preliminary conclusions on the scope of assets to be contributed to the venture and are in the process of finalizing business terms to determine the final transaction structure, under a framework in which PTTGC will be the major shareholder while SCGC will continue to hold a significant stake. The Synergy value, shareholding proportions, capital structure, and accounting treatment will be disclosed within October, before entering the approval process with the Trade Competition Commission, or TCCT, shareholders, and relevant joint venture partners. The main risk lies in the approval process and the final terms of the transaction, which could delay completion of the JV to 2027. For SCC, the key issue is not holding less than 50%, but rather the Synergy value and the economic returns from the JV. Not consolidating the financial statements may make the balance sheet more efficient. Profit from the petrochemical business will not decline, but will shift from recognition through EBITDA to Equity Income, which directly reflects the JV's net profit, enlarging the profit pool that SCC recognizes. The LSPE Ethane project, CBM Transformation, and a stronger financial position are the main supporting factors, while the JV between SCGC and PTTGC remains an additional upside that could significantly unlock value in the chemicals business.

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Off-coverage companies 1

SCG Chemicals Public Company Limited (SCGC)i
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SCGC has reached preliminary conclusions on assets to contribute to the Strategic JV with PTTGC, a corporate transaction that could unlock chemicals value.