PTT Exploration & Production

Sales volume to boost FY2014-2015 profit BUY

PTT Exploration & Production Plc (PTTEP)

- 3Q14 profit drops 16%qoq, better than expected

3Q14 profit was reported at B15.3bn, dropping 16.0%qoq (better than

expected), thanks to the following contributions: 1) We underestimated

hedging gain; 3Q14 hedging gain was as high as B2.3bn. 2) We

underestimated sales volume; 3Q14 sales volume grew by 2.9%qoq to

325,000 barrels/day. Overall, 9M14 net profit was B46bn, dropping

5.8%yoy, making up 78% of our FY2014 earnings forecast.

- Declining oil price to depress 4Q14 profit

We maintain FY2014-2015 earnings forecast. 4Q14 normalized profit is

projected to drop qoq. Petroleum selling price is projected to drop as Dubai

crude oil price has declined by 10% since end 3Q14. However, 4Q14 sales

volume is projected to increase as income from Zawtika project would be

booked for a full quarter, and write-off expense is projected to drop to

B1.3bn in 4Q14. Overall, net profit is estimated to rise by 4.6%yoy and

made a new high in 2014, and then growing further by 9.7%yoy in 2015 as

sales volume from Zawtika project would be recognized for a full year.

- Good entry point

We derive FY2015 fair value (DCF) at B180. P/E ratio of 8.8x is lower than

the regional average of 10x. Average dividend yield is 4.5%. The share

price has dropped by nearly 10% in one month, considerably reflecting a

decline in global crude oil price. This is a good entry point.