Bangchak Petroleum

Bangchak Petroleum (BCP)

3Q12 operating result projected to rebound to B1.08bn of profit
BCP’s operating result in 3Q12 is projected to rebound to net profit at
B1.08bn from net loss in 2Q12 at B385m due to the following reasons. 1) The
profit from inventory gain and reverse LCM is projected to be recognized by
around US$5/bbl (considered B1bn) along with the finished oil and crude oil
prices at end-3Q12 that have increased from end-2Q12. 2) The base GRM in
3Q12 is projected to increase to US$11/bbl compared with US$4.85/bbl in
2Q12 because 3Q12 tendency of base GRM is in a high level as a result of the
finished oil prices especially diesel and jet that have risen notably with the
crack spread at US$19.3 and US$20.2/bbl respectively. Moreover, since BCP
has run only one refining unit with the utilization rate of 40,000bbl/day (while
the main refining unit with the utilization rate of 80,000 bbl/day has to be
shut down for repairment in 3Q12 due to the fire accident on 4 July 2012),
the company is able to choose the crude oil that makes high-quality finished
oils. 3) FX gain is projected to be recognized in 3Q12 by B346m due to THB
at end-3Q12 that has appreciated. Nevertheless, in order to be cautiously
prepared, we project B100m of expense in advance for the damaged refining
unit burnt in 3Q12. Overall, BCP’s 9M12 net profit is projected to stand at
B3.13bn or 38% decrease from the same period of prior year, considered
100% of our FY2012 forecast.

Refinery to operate as normal in 4Q12, boosting NIM profit to
grow continuously
We’re likely to revise up our FY2012 net profit forecast after BCP announces
3Q12 operating result to reflect profit recognition from inventory gain in
3Q12 projected at B1bn which isn’t included in our projection. Norm profit in
4Q12 is projected to ascend from 3Q12 because BCP’s main refining unit
(with the utilization rate of 80,000 bbl/day) that had been damaged by the
fire accident is likely to resume commercial operation once again in October
2012. Accordingly, the company’s utilization rate in 4Q12 is projected to
increase 125% QoQ to 90,000 bbl/day while the gross refining margin tends
to stabilize in a high level at US$7-8/bbl due to the upcoming winter which is
a high season in which the demand for finished oils (especially gasoline) is
normally high. In addition, BCP is projected to gradually recognize
compensation from claiming for property damage and business interruption.
However, we still haven’t include this matter in our forecast, in keeping with
our cautious method.

Upgrade to “BUY”… share price projected to outperform in 3 months
Fair value at end-2012, using DCF, is B24.01/share ([email protected]). We
upgrade our recommendation to “BUY”, believing that BCP is likely to return
to outperform the market in the next 3 months with supportive factors from
2012-13 PER projected at lower than 10x (after revisal) and 2012-13 average
dividend yield projected at average 5% p.a.