PTTEP falls on dilution effect

 

The stock today lost Bt8 or 4.83 per cent from the previous closing to Bt157.50. Over 7.8 million shares have so far been changed hands, which is huge compared to some 1-3 million shares in most of the previous 10 trading days. 

 

The recapitalisation was announced on Friday evening. 

 

Asia Plus Securities said in its research note that PTTEP executives said at a conference call on July 21 that though all 650 million shares would be offered to existing shareholders, the issuance can't be described as a public offering or it would breach a rule. Of total, only 6.25 million shares would be offered to the general public. 

It estimated the average dilution effect of 22 per cent to the perspective earning per share in 2012 and 2013.  The dilution effect calculation is based on the existing assumption that the company's sale revenue and net profits would not be changed. 

"We have a negative view on this. Though this recapitalisation plan is to prepare for the company's strategy to expand the exploration and production, but it would take 3-5 years before PTTEP can realise returns from the investment (including the takeover of Cove Energy)," it said.

From overweight, the house is now "neutral" to the stock, given the low upside gain from its fair value of Bt167.51. 

Asia Plus forcast PTTEP's net profits at Bt150 billion in 2012 and Bt54.55 billion in 2013, on sale revenue of Bt193.29 billion adn Bt196 billion, respectively. This is translated to the earning per share of Bt12.60 and Bt13.74 in the years. 

 

Following PTTEP's attempt to take over Cove Energy for nearly US$2 billion, all three key rating agencies - Standard & Poor's Ratings Service, Moody's Investors Service and Tris Rating - said this investment may dampen the company's financial strength. To maintain its ratings, the company should not finance the investment solely through debt financing and thus it needs to raise capital.