The Bangchak Petroleum

The Bangchak Petroleum Plc (BCP)

- 4Q13 profit drop, but better than expected
BCP's 4Q13 net profit was B688m, plunging 49.4%qoq (better than
expected). GRM increased by 2.1%qoq to US$4.82/barrel, which we
underestimated. However, 4Q13 net profit dropped because of the
following factors: 1) Stock gain fell by 33.7%qoq to US$2.1/barrel, totaling
B622m. 2) Marketing margin from retail business dropped by 7.5%qoq to
B0.49/litre due to fierce competition, as refineries wanted to sell as much
domestic finished oil as possibly. 3) As THB depreciated by 4.7%qoq at
end-4Q13, BCP faced B418m loss from forward exchange rate contract.
However, BCP benefited from hedging at US$1.19/barrel, totaling B353m.
Overall, FY2013 net profit increased by 8.9%yoy to B4.65bn.
- Solar plant to boost profit in 2014
We project 1Q14 profit to grow significantly from 4Q13. GRM is projected
to rise on seasonal effect, reflecting from Singapore GRM since the
beginning of 2014 until present that increases by 54%qoq to the average
of US$6.6/barrel. Moreover, many refineries worldwide would have an
annual shutdown in late 1Q14 after running at their full capacity during
winter, so some supplies would disappear. BCP’s FY2014 net profit is
projected to grow by 9.8%yoy. Despite a 46-day planned shutdown of a
refinery in May-June 2014, income from solar power plant (Phase I and II
for a full year, and Phase III since 2H14) would be booked.
- "BUY". 2H13 dividend yield at 2.8%
We project end-2014 fair value (DCF) at B36/share. We reiterate “BUY”.
BCP’s profit is likely to grow nicely and stably in the next couple years, as
income from solar power plant with steady profit would grow as there have
been more power deals. BCP’s 2H13 dividend is B0.75 (2.8%). XD date is
3 March 2014.