PTT

PTT Plc

 

Positive outlook remains in short term, but with concern over global economy in long term

There’s no new issue from yesterday’s analyst meeting while the management maintains the positive prospective toward the petroleum and petrochemical businesses in a short term due to the following reasons. 1) The overall look of global economy is projected to recover once again as a result of the economic-stimulus measures of China and the US and the easy monetary policies of various countries worldwide that will rescue the global economy from facing depression. 2) The crude oil price will fluctuate in a high level due to the coming season of hurricane, winter and the tension in the Middle East countries. 3) The price of petrochemical products will recover after hitting the record low in 2Q12 due to the upcoming season of production in preparation for the festivals in the late of year and the maintenance shutdown of petrochemical factories in 3Q12. However, the public debt crisis in Europe is still a crucial factor that will pressure the growth of global economy in a long term, probably affecting the demand for petroleum and petrochemical products. Nevertheless, PTT still has marched on investment as planned, assigning B900bn expenditure budget for investment in the next 5 years. The company aims to invest in the upstream

business, petroleum exploration through PTTEP with 41% in proportion while another 41% goes to investment in natural gas business including gas pipeline, LNG terminal and NGV station, etc. Moreover, the company is on a search for opportunities to invest in the related business such as coal, palm,FLNG and power plant. For the rest 16%, it will be an investment in the refinery and petrochemical business. In addition, PTT has planned to sell the businesses that aren’t the main business and do not generate profit in order to control the cost and enhance competitiveness (there are currently 20 from 250 companies in the sector).

 

3Q12 profit tends to recover after bottoming in 2Q12

 

We maintain our 2012-13 forecast, projecting norm profit in 3Q12 to increase from 2Q12 that had hit the record low. The petroleum price tends to recover which will make the average selling price of petroleum products increase. Moreover, there’s a high chance that PTT will recognize stock gain in 3Q12 along with the rise of oil price, reflected from the current Dubai crude oil price that has soared by 18% from end-2Q12 to US$109.4/bbl. For the refinery business in 3Q12, GRM is projected to increase from 2Q12 although it’s a low season due to the benefits from maintenance shutdown of refineries in Asia, America and Europe in order to prepare for operation in the winter.

The price and spread of petrochemical products are projected to recover as a result of restocking to produce goods for the festive season in the late of year.

 

BUY… top pick of energy sector

 

We recommend “BUY” for PTT.

 

Fair value, based on DCF and sum of the

parts, at end-2012 is B390.33/share. We reiterate investing in PTT due to the operating result in 2H12 that is likely to recover. The earlier share price is quite laggard compared with the share prices of other companies in the sector. The interim dividend is projected at B6/share, considered 1.75% dividend yield (semi-annually).