Thai Oil

Thai Oil Plc (TOP)

- B6.5bn loss in 4Q14 as projected     

TOP posted net loss of B6.5bn in 4Q14, close to our projection, mainly because of stock loss (LCM included) of as much as B12bn in total and more than 30%qoq decrease in aromatics spreads. Compensating factors in this quarter, however, are the market GRM that increased 78.3%qoq and utilization rates of the refinery and aromatics plant that have returned to normal. Overall, TOP faced net loss of B4.03bn in FY2014, versus net profit of B10.4bn in FY2013.   

- Normalized profit to rebound in 1H15, weaken in 2H15   

We project TOP to revert to net profit in 1Q15; good performance is also anticipated in 2Q15 thanks to a high season and lower stock loss. However, normalized profit in 2H15 would weaken from 1H15 because of the following factors: 1) A high season of the refinery business will have come to an end. 2) There will be finished oil supply of 1.2 million barrels a day from new refineries. 3) There will be new paraxylene supply of around 2.6 million tons a year. Yet, growth is still foreseen for FY2015 from TOP’s running of the refinery and aromatics plant at the full capacity without a major turnaround like in 2014. Nevertheless, we have still not included stock gain/loss in the forecast. 

- HOLD for 2H14 dividend of B0.60/share    

2015 fair value (DCF) is derived at B48; we reiterate HOLD. TOP announced 2H14 dividend at B0.60/share or a half-year yield of 1.2%; XD date is February 24 and dividend payment date is April 29 (1H14 dividend was B0.56/share). Investors can also switch to PTTGC (FV@B68), which is the most laggard among peers and still provides around 15.9% upside.