PTT Exploration & Production

PTT Exploration & Production Plc (PTTEP)

- No new issue
According to the analyst meeting, no new issue has been discussed. PTTEP
would continue its business expansion plans. Its production capacity is
expected to grow by 10%yoy in 2014 and 7%yoy in 2015 thanks to
Zawtika project (Myanmar), Hess acquisition and Algeria project. PTTEP
maintains its plan to raise its capacity from currently 330,000 barrel/day
to 600,000 barrel/day within 2020; maintaining the capacity of its current
active projects and exploring and developing new projects under PTTEP's
concession. PTTEP has recently formed a joint venture in Brazil, which
benefits from deep-water exploration blocks and convenient
transportation. Brazil mainly exports oil around Latin-American and
European countries. For the project in Brazil, The company targets its fiveyear
investment budget at US$100m. Moreover, PTTEP has been
interested in acquisition of new businesses (M&A), focusing on active
projects to make spontaneous profit (especially not very big projects which
is convenient for PTTEP's administration and financial management).
Currently, PTTEP has US$1.6bn cash flow with 0.34x debt-to-equity ratio.
Overall, PTTEP would still have enough cash flow to invest on new projects
without an effect on its financial status.
- Profit to grow throughout 2014
We maintain our forecast for FY2014. 2Q14 profit is projected to grow
from 1Q14, owing to increasing sales after the acquisition of two projects
from Hess Corporation Thailand on April 22, 2014. The two projects are 1)
Sinphuhorm (Hess holding 35% stake) with 100 million cubic feet a day
capacity of natural gas production and 2) Pailin (Hess holding 15% stake)
with 360 million cubic feet a day capacity of natural gas production, which
would help increase total sales volume of PTTEP by 10,000 barrels a day.
For Zawtika project in Myanmar (M9), the company maintained its plan to
delay the commercial production of natural gas for selling back to Thailand
(240 million cubic feet a day) from 1 April previously scheduled to July
2014. Accordingly, petroleum sales in 2H14 are anticipated to grow from
1H14, which would help to boost the quarterly profit and full year profit to
make a new high by year with the growth of 20.1%yoy.
- Buy
FY2014 fair value (DCF) of B195 implies 22% upside with FY2014 P/E ratio
of 9.2x (versus the sector's average of 11.1x). We recommend buying