Affin Keeps Overweight On Malaysia Oil, Gas Plays

Affin Investment says Petronas' plans to develop a $20 billion oil complex (to be known as Rapid) that includes an oil refinery and petrochemical plants in the southern Johor state will benefit the country's oil and gas fabricators in the longer-term. The house says Petronas Chemicals (5183.KU), together with BASF as its potential partner, may play a "key role" in the ownership of the planned naphtha cracker. This third cracker will boost capacity by 30% (from 11 million tons currently). Impact on other domestic oil and gas companies' earnings may be positive, with potential contracts flowing in by 2012-2014. Apart from PChem, other key potential beneficiaries are fabricators and engineering & construction companies - Dialog (7277.KU), Kencana (5122.KU), KNM (7164.KU) and Muhibbah Engineering (5703.KU). In addition, Dialog may further benefit from the project spillover to its MYR5 billion Pengerang terminal and future catalysts handling, and plant maintenance works, it adds. Affin keeps an Overweight rating on Malaysia's Oil and Gas sector.