PTT

PTT Plc
Petroleum & petrochemical industries signal recovery in 2H13
The petroleum and petrochemical businesses tend to revive gradually in
2H13 along with the economic situation. Dubai crude oil price is
projected to stand above US$103-105/barrel due to the Atlantic
hurricane season in August - September as well as the political unrest in
the Middle East countries which are the world’s major oil producers.
Henry Hub natural gas price is anticipated to rally continuously after the
government’s approval of LNG export. Gross refinery margin (Singapore)
would poise around US$6-7/barrel in 2H13 due to increasing oil
demands during a summer in the Middle East and Africa in 3Q13 and oil
restocking for using during winter. For petrochemical business, spread of
olefins product would gradually widen on rising demands for
downstream products during the year-end festive season and due to
current low oil in stock. Spread of aromatics product would decrease,
especially for benzene.

Cut 2013 forecast to reflect effect from GSP#5 and PTTGC
We revise down our profit forecast for 2013, as shown in the table, in
order to reflect the impacts on the company’s earnings in 2H13 from the
following incidents. 1) The gas separation plant unit 5 (GSP#5) had to
cease operation after a lightning strike on the Waste Heat Recovery Unit
or WHRU on the morning of 14 August. The repairs are projected to take
around 5 months and would thus affect a net profit of PTT, as the owner
of GSP#5, by B300m a month, PTTEP, as the raw material supplier for
GSP#5, by B180m a month, and PTTGC, as the receiver of products
from GSP#5, by B400m a month. 2) The leakage of a 16-inch offshore
crude oil pipeline of PTTGC at a single point mooring 20 km southeast of
Map Ta Phut port spilled 316 barrels (50 tons) of crude oil into the sea.
Advance provision for the damage is preliminarily set at B1.5bn, which is
equal to the insurance money PTTCG has insured for damage on third
party and PTTGC is projected to claim compensation from the insurance
company later. Another negative factor is a 3.5-month unplanned
shutdown of LDPE plant. 3) 1H13 profit was reported lower than
expected due to pressure from significantly decreasing earnings of
subsidiaries and a Fx loss in 2Q13. Under the new forecast, profit of PTT
would decline slightly by 6%yoy in FY2013, before rebounding again in
2014 by 10%yoy.

Buy. New fair value implies 20% upside
Under the new forecast, new 2013 fair value, DCF and sum of
the parts, is B384.2/share (from B398.8). We reiterate to buy
due to robust growth outlook of PTT and subsidiaries, while
dividend yield can be expected at 4% p.a. on average.