PTT

PTT Plc
Profit exceeded the street’s
PTT posted a strong 3Q13 profit of Bt30,877m, up a marked 251% QoQ but down 14% YoY. The result exceeded our expectation and the consensus estimate by 20%, due to better gas business numbers (despite the GSP#5 shutdown) and also stronger refining associates’ performances than assumed.    
Results highlights
Core earnings came to Bt18,337m—up 27% QoQ but down 6% YoY. Apart from a solid PTTEP profit, stronger numbers at PTT’s core gas unit pushed up 3Q13 results. Gas business EBITDA jump-ed a surprising 23% QoQ to Bt11,076m, despite the GSP#5 shutdown, which limited gas and GSP product sales. Gas throughput averaged 4,538mmcfd, down 3% QoQ, while GSP output fell 11% QoQ to 1,446k tonnes.
Yet, rising GSP product prices in tandem with petrochemical prices and a shallower loss on LPG sales outweighed the effect of the volume drop. GSP#5 mostly produces LPG with a capacity of 900ktpa—57% of its output capacity and 32% of the GSP units’ combined LPG capacity. The sales price is capped at US$333/t versus PTT’s pooled gas cost of $383/t.    
On the flipside, retail oil EBITDA slipped 7% QoQ to Bt3,034m, due to slimmer retail marketing margin. Also, coal EBITDA dropped a further 14% QoQ to Bt1,043m. Although sales tonnage rose 16% QoQ to 2.9mt, a lower ASP weighed down on the coal unit’s performance—PTT reported an ASP of US$70/t versus $74.3/t in 2Q13.
Outlook
Soft oil prices dampen the 4Q13 bottom-line outlook somewhat. But the resumption of GSP#5 output (currently ~50% of nameplate capacity), recovering gas sales and seasonally high demand for petrochemical products will boost PTT’s operational numbers, we believe.
What’s changed?
The reported 9M13 bottom-line was Bt79,261m—equal to 77% of our full-year forecast of Bt103,634m and 73% of the street FY13 projection. As we anticipate a QoQ dip in 4Q13 earnings, we maintain our model unchanged for the moment. However, we expect the street FY13 projection to be trimmed in the weeks ahead.
Recommendation
PTT’s current valuation offers a better risk-reward proposition, we believe. While a consensus FY13 earnings forecast downgrade is around the corner and LPG & NGV price de-control is unlikely anytime soon, these factors appear to be already priced in. A better 4Q13 operational outlook and forecast moderate FY14 profit growth should increase investor appetites for the stock.