PTT Global Chemical

PTT Global Chemical Plc (PTTGC)  

- Massive net loss projected in 4Q14    

 

PTTGC is projected to face B4.34bn net loss in 4Q14 (versus B7.6bn net profit in 3Q14) as a result of stock loss and loss of B15bn from aromatics business plus NRV. Still, PTTGC would post normalized profit in 4Q14 since market GRM has increased to US$4.9/barrel, olefins spreads have widened 14.5%qoq on average, and plastic sales volume has risen by 21.0%qoq. Overall, FY2014 net profit is estimated at B15.6bn, plunging 53.0%yoy, worse than our initial forecast. 

 

- Revise down forecast, yet profit to almost double in 2015    

 

We revise down PTTGC's earnings forecast in 2014-2015 to reflect higher-than-expected stock loss in 2014 and one-month shutdowns of an aromatics plant unit 2 and I4-1 and I4-2 olefins plants in 3Q15. However, PTTGC's profit is expected to revive significantly in 1Q15; market GRM has risen from 4Q14 thanks to seasonal effect, and stock loss is expected to decrease. January olefins spreads have weakened from 4Q14 but remained very high. Overall, FY2015 net profit is estimated to jump 90.3%yoy. 

 

- Laggard peers. Good entry point   

 

Under the new forecast, FY2015 fair value is revised down from B68 to B67.50. We reiterate BUY for the share price has overly absorbed negative factors. Current P/E ratio is only 8.7x, lower than the regional average. Dividend yield can be expected at 6.1%p.a.