PTTEP, PTT shares fall on recapitalisation plan

Yet Moody’s Investors Service said it was pleased with the plan, as raising around Bt98 billion (about US$3 billion) in the country’s biggest-ever equity offering would strengthen PTTEP’s credit profile in light of huge capital expenditure. That includes a potential $1.9 billion if the takeover of UK-based Cove Energy goes through. The auction to purchase Cove Energy closes tomorrow.
After announcing the plan on Friday evening to issue 650 million shares, PTTEP’s share price yesterday lost Bt8 or 4.83 per cent to close at Bt157.50. PTT’s stock price also declined, by Bt14 or 4.12 per cent to Bt326. Asia Plus Securities forecasts PTTEP’s net profit at Bt150 billion this year on sales revenue of Bt193.29 billion and Bt54.55 billion in 2013 on revenue of Bt196 billion. This translates into earnings per share of Bt12.60 and Bt13.74 in the two years.
In its research note yesterday, Asia Plus estimated an average dilution effect of 22 per cent to the respective EPS in 2012 and 2013. The calculation is based on the existing assumption that the company’s sales revenue and net profits will not be changed.
From overweight, the securities house is now neutral on the stock, given the low upside gain from its fair value of Bt167.51.
Bloomberg quoted Paworamon Suvarnatemee and Wattana Punyawattanakul, analysts at Credit Suisse Group, as writing in a note yesterday that “$3 billion is higher than our forecast of $2 billion earmarked to buy Cove”. PTTEP plans substantial capital expenditure of $3.6 billion for this year. Aside from Moody’s, Standard & Poor’s Ratings Service and Tris Rating both earlier expressed concern, as this level of spending could raise the debt level without a capital increase.
In a statement, Moody’s described the recapitalisation plan as positive, and said it planned to review the rating outlook for PTTEP, currently rated “Baa1” with negative outlook, when the equity offering is completed and when it reviews the pending acquisition of Cove Energy.
“The proposed equity issuance will improve PTTEP’s funding mix and reduce its reliance on debt to fund its long-term reserve and production growth plans,” said Simon Wong, a Moody’s vice president and senior analyst.
PTTEP president Tevin Vongvanich said in a statement on Friday that the stock sale would help the company meet a target to increase daily production of oil and natural gas to 900,000 barrels of oil equivalent by 2020. Daily sales volume was 253,411boe in the first quarter, according to the company.
The sale would be Thailand’s largest-ever equity offering, topping Siam Commercial Bank’s Bt65-billion share sale in 1999.