PTT

Good factor comes as expected BUY

PTT Plc

- EPAC nods on B1/kg NGV price hike

At the Energy Policy Administration Committee (EPAC) meeting on December 2,

2014, the following actions were approved 1) LPG price for household and

transportation was raised by B1.03/kg to B24.16/kg; this would have no positive

sentiment on PTT because it is an increase in taxes and levy to the oil fund. 2) NGV

price for transportation was increased by B1/kg to B12.50/kg; this would directly

benefit PTT because the company's NGV selling price is currently lower than the

production cost of B15.50/kg.

- Up revision to reflect B1/kg NGV price hike

We revise up PTT's earnings forecast from 2015 on (see page 2) to reflect the second

B1/kg NGV price hike (after the previous B1/kg raise in October 2014). The hike

would decrease PTT’s loss from NGV sales from B16bn/year to B12bn/year, under the

assumption that NGV production cost is B15.50/kg and the sales volume is 9 million

kg. PTT's net profit is revised up by 3.8% from the initial forecast in 2015 and 3.6%

in 2016, and the fair value is raised by B8. For the best-case scenario that NGV price

is gradually increased to reflect the production cost, the fair value is projected to rise

by B24 or 5.8%.

- FY2014 fair value is B413

Under the new forecast, we revise up PTT's FY2015 fair value (DCF) from B405 to

B413, reiterating BUY. There would be additional upside from price restructuring (to

reflect actual market price) and extraordinary income from subsidiaries (BCP, SPRC,

and GPSC).