Thai Oil

Thai Oil Plc (TOP) 

 

- 2Q15 profit rises 38.5%qoq as expected  

TOP announced 2Q15 net profit at B6.2bn or a growth of 38.5%qoq, close to our forecast. The contributions were 1) there was stock gain of US$2.5/barrel or B2.2bn, 2) the aromatics business (TPX) reverted from loss of B742m to profit of B457m, 3) profit from the lubricating oil business improved 62.7%qoq to B524m, and 4) there was tax incentive from BOI for TOP’s environmental investment project. On the other hand, market GRM decreased 15.9%qoq to US$7.4/barrel and the company faced Fx loss of B1.4bn in this quarter. Overall, 1H15 net profit was B10.7bn, leaping 135.1%yoy and making up 74% of our full-year forecast. 

- Profit to weaken in 2H15 from low season and increasing supply  

We maintain FY2015 profit forecast, projecting 2H15 profit to weaken from 1H15 and account for only 26% of our full-year forecast. Under a conservative forecast, we have included a risk of stock loss in 3Q15, which would be close to the stock gain in 1H15. The profit weakness in 2H15 would also result from a low season of the refinery business and 400,000 barrels/day new supply from refineries in India. For the aromatics business, there would be new supply of 800,000 tons/year from China in late 3Q15. Overall, FY2015 net profit is estimated at B14.5bn, rebounding from net loss of B4bn last year.  

- Hold for dividend  

2015 fair value (DCF) is B56. We reiterate to hold TOP for its dividend yield of 6.2%p.a. or switch to IRPC, which has more than 30% upside and would step up to a new profit base after Phoenix project is complete in late 2015.