PTT

PTT Plc (PTT)
Insights into the CEO’s vision
Investment thesis: Yesterday, we attended the special analyst meeting that introduced PTT’s new CEO, Dr Pailin Chuchottaworn. At the event, he laid out his vision for PTT group, which sounded convincing to us. Regardless, PTT stands out as a safe-haven play within Thai O&G space, given that it is the least prone to earnings swings of the Energy stocks we cover. Further-more its current valuation is appealing—assuming a 15% discount for its holding company characteristics, the share prices of its subsidiaries imply a sum-of-the-parts valuation of Bt300.
New CEO, new look: Dr Pailin put forward his vision for sustaining the group’s development. He said he is looking to realign growth with public/community acceptance issues, as PTT is not only a SET-listed firm, but also a state enterprise involved in infrastructure and industrial projects and answerable to the people. He vowed that the group will become “a technologically advanced and green national oil company” rather than simply holding “national oil firm status”. This initiative should enhance and sustain PTT’s growth platform over the long-term.
Governance & compliance in focus: In order to achieve long-term sustainability, he aims to adopt the group's new corporate governance and compliance framework. He believes it will build “trust and confidence” among all the stakeholders of PTT group, helping to ease public resistance to new projects (a problem in recent years). Dr Pailin also called for greater use of market mechanisms to determine domestic energy prices in order to remove subsidies and preserve energy sources for the future.
Transforming into a conglomerate: The group will continue with existing strategic directions, but with a greater effort to transform into a “business conglomerate” from an O&G conglomerate. In doing so, PTT will seek opportunities for infrastructure and non-oil retail expansion. Dr Pailin is looking to develop non-oil retail businesses into community shopping centers. However, he does not anticipate a substantial contribution—the move is aimed at offering the “one-stop-shopping” concept for motorists.
No material impact as yet: The PTT CEO also guided that the global GDP growth slowdown will impact only marginally on the group's 3Q11 profitability. He remains optimistic about the outlook for energy prices, citing that oil prices are unlikely to fall below current levels. Regardless, PTT group has adopted more prudent risk management—Dr Pailin is confident that even under the worst-case scenario, the effect will be much more modest than was the case in the wake of the Sept 2008 financial crash.