Jiutian Chem - Placement

Jiutian Chem (S$0.16) - Placement proceeds to fund stake in methanol plant
Jiutian is placing out 276m new shares at S$0.135 each (6.17% discount to its average share price in the past two days) to raise S$36.9m, largely to fund an additional 24.5% stake (Rmb98m) in its methanol JV (from 51% to 75.5%). Our FY08-10 EPS forecasts have been reduced by 9-15% to account for the 16.7% dilution from the placement, partially offset by lower interest expenses from lower debt. On the other hand, our target price has been raised from S$0.09 to S$0.10, still based on 1x CY08 P/BV. Jiutian is trading at 13x CY09 P/E, at a steep premium to the peer average of 5-6x. Maintain Underperform on the still-challenging operating environment in FY08. Report by CIMB-GK