IRPC

IRPC Plc 

- 4Q14 faces loss as projected    

 

IRPC faced B5.78bn net loss in 4Q14, close to our projection, mainly due to stock loss (LCM included) of B8.8bn in total, versus B22m net profit in 3Q14. In terms of normalized operation, however, the company could reverse to be with profit of around B1.6bn, versus loss of B700m in the previous quarter. 4Q14 was the first quarter with normalized profit, thanks to increasing GRM and petrochemical spread. Overall, FY2014 earnings result was net loss of B5.2bn, in line with our forecast, versus FY2013 net profit of B826m. 

 

- Net profit projected in 2015, continued growth in 2016    

 

We maintain our forecast for FY2015, projecting the company to reverse to show net profit of B2.9bn from UHV (Phonenix Projects) that will commence a commercial run in 4Q15 and thus boost profit margin at least by US$2/barrel, resulting in the market GIM of above US$10/barrel in a normal situation. The UHV project will be recognized for a full year in 2016, which would increase IRPC profit base to above B5bn since 2016 onward. However, for 2015, there would be non-recurring items that we have still not included in our forecast, e.g. remaining insurance claim of B1.7bn, profit from land sales, and stock gain. 

 

- Overvalued. Downgrade to HOLD in short term    

 

2015 fair value is B3.60. However, the share price has risen rapidly more than 25% over the past two weeks until overvalued, so in the short term we downgrade our recommendation from BUY to HOLD, waiting to buy again when the price weakens.