Bangchak Petroleum

Bangchak Petroleum Plc (BCP)  

Earnings in line with estimate
BCP reported a 1Q13 net profit of Bt2,198m, down 10% YoY but up 92% QoQ. Stripping out extra gains from FX, inventory and hedging totaling Bt842m, 1Q13 core earnings would be Bt1,356m, a turnaround from a core loss of Bt53m in 1Q12 and up 32% QoQ. The 1Q13 bottom-line was in line with our estimate, but was 37% above the consensus, due to higher-than-expected extra gains. The 1Q13 core profit was in line with both our model and the street number.
Results highlights
The drivers were: 1) a bigger QoQ crude run (down 1% YoY, but up 18% QoQ to 100KBD), 2) greater marketing sales volume (up by 3% YoY and 7% QoQ), 3) a fatter market GRM (up 19% YoY [but down 25% QoQ] to US$7.97/bbl), despite a weaker marketing margin (down by 19% YoY and 24% QoQ to Bt0.50/liter), 4) a bigger earnings contribution from the solar power business (EBITDA rose by 31% QoQ), 5) a lower SG&A/sales ratio (2% in 1Q13 compared to 3.4% in 4Q12)  and 6) lower interest expenses (down 2% QoQ).
Outlook
Even though the average Singapore benchmark GRM in 2Q13-to-date has fallen by 15% YoY and 32% QoQ to US$5.7/bbl, BCP’s core earnings for the quarter are expected to post YoY growth (and be stable QoQ), driven by a greater crude run, increased marketing sales volume, a fatter base GRM (led by a better product yield) and an expanding contribution from the solar power unit. BCP’s 2Q13 bottom-line could get a boost from an insurance payout for the fire at its CDU No.3 unit in July 2012. Based on management guidance, we anticipate that the insurance reimbursement will be at least Bt1bn (we haven’t factored the payout into our model).
What’s changed?
1Q13 core profit represents 26% of our FY13 core earnings forecast of Bt5,230m, which we maintain unchanged.
Recommendation
BCP’s core earnings should rise YoY and be fairly stable QoQ in 2Q13—unlike other Thai refining-cum-chemical plays, whose core profits are expected to weaken QoQ. Moreover, even though we are bearish about refining fundamentals, we think the firm’s business model (together with the possibility of it unlocking hidden value by spinning off solar assets) will generate greater investor interest in the months ahead. BCP’s valuation remains undemanding—an FY13 PER of 10.6x and an FY13 EV/EBITDA ratio of 6.8x, deep discounts to the regional means of 13.6x and 7.9x, respectively.