PTT

PTT Plc 
Investment thesis
Despite weaker operational results in 3Q12 and expectations of further weakness through 4Q12, PTT remains one of our two preferred upstream plays within Thai Energy space. The prospects for FY13 are better—a stronger PTTEP performance and buoyant gas sales. The resumption of NGV price adjustments by early next year would prompt a further re-rating, as the move would boost confidence in the govt’s execution of its liberalization plan for domestic energy prices.
Results in line with model
PTT posted a 3Q12 profit of Bt36,054m, down by a substantial 323% QoQ and 67% YoY. The result was, however, in line with our expectation (but exceeded the street by 12%). Core earnings fell by 24% QoQ and 13% YoY to Bt19,429m, as expected. 
Results highlights
Despite a stronger PTTEP performance, weaker numbers at all PTT’s core businesses (gas, oil and coal) weighed down the third-quarter core profit. Gas business EBITDA dropped by 19% QoQ to Bt12,067m, despite the fact that gas sales and GSP production reported record highs of 4,611mmcfd and 1.67mt, respectively, up from 4,507mmcfd and 1.59mt for 2Q12. A deeper loss on NGV sales and lower chemical product prices dented the gas business’s operational profit.
Retail oil EBITDA dived 36% QoQ to Bt2,906m, due to a sales volume decline from 5,859m liters to 5,665m liters and a slimmer retail marketing margin. Reported retail market margin dropped to Bt0.83/liter from Bt0.95/liter in 2Q12. International Oil Trading EBITDA turned a deeper loss of Bt2,195m (the 2Q12 loss was Bt344m), due to negative oil trading margin of Bt0.13/liter versus a Bt0.04/liter gain a quarter ago.
Coal EBITDA fell by 10% QoQ to Bt2,322m even though the reported sales tonnage expanded to 3.2mt from 2Q12’s 2.7mt. ASP was squeezed (from US$94/t to $84/t) which outweighed the effect of the output growth.
Outlook
The prospects for 4Q12 are weaker. Gas sales will drop on seasonality, while NGV sales are likely to post a deeper loss in tandem with increased gas wellhead prices in Oct. The Coal business will be also hit by falling price realization. We maintain the assumption that there will be a further write-off on EMG of about Bt3.5bn.
What’s changed?
We maintain our FY12 forecast unchanged for the moment at Bt98,879m—the 9M12 bottom-line represents 83% of our full-year forecast.