PTT

PTT Plc
3Q13 profit surges aggressively, thanks to core business and subsidiaries
PTT posted 3Q13 net profit at B30.9bn, jumping 151.5%qoq – better than
expected, due mainly to a significant increase in profit. 1) For the natural gas
business, although gas sale volume dropped 2.9%qoq as a result decreasing
demands from EGAT and the gas separation plant and total product sale volume
of the gas separation plant decreased 11%qoq from an unplanned shutdown of
GSP#5 after the lightning accident on 14 August, they could be offset by an
increase in prices of every product from the gas separation plant following global
petrochemical sale prices. Consequently, profit from the gas business could grow
35.2%qoq. 2) For the petroleum exploration and production business through
PTTEP, the pofit grew as much as 67.0%qoq. 3) Share of profit from subsidiaries
skyrocketed 678.9%qoq to B10.4bn mainly because the refinery business could
book a high stock gain and the overall GRM increased following wider spread of
middle distillate oil (diesel and jet fuel). Accordingly, net GRM (stock gain/loss
and hedging gain/loss included) of the sector shifted to US$7.39/barrel from
US$2.37/barrel in the previous quarter. Similarly, earnings from the aromatics
petrochemical business have also risen following wider product spread, while
earnings from the olefins business have declined as a result of a 52-day shutdown
of I4-1 olefins factory of PTTGC. 4) The company could book a Fx gain of
B2.05bn, versus a Fx loss of B3.47bn in 2Q13. Overall, 9M13 net profit stood at
B79.3bn, down 3.5% from the same period last year and making up 81% of our
FY2013 forecast.
- Profit to weaken in 4Q13. Growth foreseen in 2014 from higher capacity
We maintain our FY2013 profit forecast. 4Q13 normalized profit is projected to
decline from the previous quarter due to a stock loss, in case that Dubai crude oil
price stays close to US$100-105/barrel in the remainder of the year. Moreover,
weakening oil price might make PTTEP’s petroleum sale price lower than the prior
quarter as well. However, PTT's profit is anticipated to rebound as the GSP#5 has
currently resumed its production at the utilization rate of 50%, boosting gas
separation plant product sales volume, benefiting PTTGC as it will have more
feedstock to increase olefins production. Furthermore, PTTGC would benefit from
LDPE factory that has resumed its commercial run after two-month unplanned
shutdown in 3Q13. Due to a rise in GRM and spread of petrochemical product in
high season (winter in many continents) and production season for New Year
spending, entrepreneurs are likely to stockpile more feedstock, both aromatics
and olefins. FY2013 profit is projected to drop 6%yoy but rebound 10%yoy in
2014, as all factories of PTT will have resumed their production after unplanned
shutdown in 2013.
- FY2014 fair value is B407, implying 32% upside. PER lower than regional average
We switch to use 2014 fair value, DCF and sum of parts, at B407.14/share. We
reiterate BUY. The current share price has 32% upside. 2013 PER is low at only
9.2x, versus the regional average of 11x. Dividend yield is expected at 4% p.a.
The share price is substantially laggard peers.