PTT

PTT Plc

- NCPO approves NGV price hike, relieving loss for PTT

The National Council for Peace and Order (NCPO) has approved the
following policies: 1) LPG price for transportation would be raised by
B0.62/kg from B21.38/kg to B22/kg (still lower than LPG price for
household of B22.63/kg); this would have no effect on PTT because the hike
would come mainly from an increase in taxes and tax levy to energy fund.
2) NGV would be raised by B1/kg from B10.50/kg to B11.50/kg; this would
directly benefit PTT which has been selling NGV at B15.5/kg (lower than the
actual cost). It is believed that the National Energy Policy Committee
(NEPC) would approve the NCPO's plan. After this, LPG and NGV prices
might be raised to reflect the actual cost in a long run.

- Up forecast from B1/kg NGV price hike
We revise up PTT's earnings forecast from 2015 on in order to reflect the
effect from B1/kg NGV price hike (very high probability). Under the
assumption that the current NGV price is B15.5/kg and the NGV sales
volume is 9 million kg/day, PTT's loss from NGV sales is estimated to
decrease from B20bn/year to B16bn/year. FY2015-2016 earnings are
projected to grow by 2.6% and 2.4% from the forecast, respectively.
FY2014 fair value is revised up by B8. In the best-case scenario that NGV
price is raised to the actual cost, PTT's fair value is estimated to increase by
11.1% or B40/share.

- New FY2014 fair value is B368. FY2015 fair value is B420
Under the new forecast, we revise up PTT's fair value (DCF) from B360 to
B368 in 2014 and B420 in 2015. We reiterate BUY for potential upside from
energy price restructuring to reflect the global actual cost.