PTT Exploration & production

PTT Exploration & production Plc (PTTEP)

Meeting postponed as shareholders wants more time to consider voting on capital increase
Yesterday (23 August) PTTEP’s Board of Directors announced a cancellation the extraordinary meeting of shareholders No.1/2012 to consider capital raising plan, which was scheduled to be held on 24 August, as the company had received feedbacks from some shareholders that more time is needed to study details in order to consider voting on the capital increase matters. Consequently, for the benefits of PTTEP and shareholders, the Board decided to cancel the
extraordinary meeting. However, PTTEP still maintained the capital increase plan and it will appoint the new date of the shareholders’ meeting later. Moreover, PTTEP also held an analyst meeting yesterday afternoon to clarify additional details, especially what shareholders are
worrying about, which are 1) the structure of the capital raising – fairness in the allocation of the new shares, 2) investment in Cove Energy – whether the returns would worth the investment, 3) the size of the capital increase – the reason why the capital raising is almost B100bn, and 4) the company’s goal of 900,000 bbls/day capacity – whether additional capital increase will be needed in order to reach the goal. PTTEP’s management will need additional time to inform and gain
understanding among shareholders.

Time needed for capital increase plan consideration, but Cove acquisition will continue
For the next step after the postponement of the extraordinary meeting of shareholders, it will take at least 1 month for the management to reconsider the capital raising plan before bringing it under the Board’s consideration again. If the Board approves the plan, it will take around 30-45 days to call an extraordinary meeting of shareholders to vote on the plan again. After the shareholders’ meeting approves the plan, it will take around 1-2 months for book building to find the capital increase price, which will be followed by the share allocation. All these processes
will take totaling 3-5 months to complete. However, for the investment in Cove Energy, PTTEP will still proceed with the plan it has already prepared cash flow from operation and short-term loan, which makes current debt to equity ratio (D/E) of the company rise to 0.6-0.7x from 0.4x. Nevertheless, the company has already notified credit rating agencies about the capital increase postponement. Preliminarily, the credit rating agencies might reconsider the credit rating again after the capital increase.

Meeting postponement might pressure share price.Reiterate “Hold”

Fair value at end-2012 (DCF) is B167.51. We reiterate our recommendation to only hold the stock as in the short term the share price might be depressed by the uncertainty of the capital increase plan after the postponement.