PTT

PTT Plc

Prepare investment expansions in ASEAN to support AEC
According to the analyst meeting yesterday, PTT is preparing for overseas investments in
ASEAN in order to support the AEC in 2015; most of the investments are mega projects in
the countries which have higher petrochemical and petroleum demands than domestic
supplies, so these projects would be able to generate significant value added for PTT in
the long run. Now PTT is conducting a feasibility study and seeking partners for
constructions of a refinery with a daily capacity of 660,000 bbls and a petrochemical plant
with an annual capacity of 1 million tons in Vietnam (worth totaling of B750-900bn);
these processes would take around 1 year. At the same time, PTT is also studying
feasibility of investments in integrated refinery and petrochemical businesses in Indonesia
and Malaysia. For the overall business outlook during the rest of the year, a key factor
that will have an influence on the industry’s profit is the world economy. As investors are
still worrying whether the U.S. and European economy would be able to recover in the
near future, Asian markets, as a result, would be a major economic driving factor in the
rest of the year. However, with the policy of China (a main petroleum and petrochemical
consumer in Asia) to maintain the economic stability instead of boosting growth, demands
for petroleum and petrochemical would still be decelerated (only produced to orders),
which would hinder the product prices from significant surges. Nevertheless, average
petroleum and petrochemical prices and spreads in 2013 would still be higher than 2012.
- 2Q13’s profit to weaken qoq due to every business
We anticipate a decline in 2Q13’s profit comparing to 1Q13’s because of the following
reasons. 1) Average petroleum selling price is projected to decrease from 1Q13 on
concerns toward the world economy that has been adversely affected by the Euro-zone
debt crunch and 2013’s world GDP growth cut by the IMF, which have depressed overall
oil demands. Furthermore, increasing supply from the non-OPEC group will also suppress
the oil price, and might even cause a significant stock loss for the refinery sector. 2)
Petrochemical selling price is estimated to decrease from 1Q13. Olefins product price
tends to decline following the prices of crude oil and Naphtha and decreasing demands
due to concerns toward the world economic slowdown. For the aromatics line, Benzene
price is projected to fall as a result of the oversupply problem, while Paraxylene price
would decrease along with decelerating polyester market in China. 3) PTTGC and TOP
have planned for a 60-day and 15-day refinery maintenance shutdown, respectively. 4)
PTTEP might have to recognize an extraordinary expense for impairment of Montara
project in Australia due to a postponement of the project’s commercial run from February
to late May 2013.
- Buy. PER is low at only 8x, versus sector’s PER of 10-11x
2013’s fair value, using DCF and sum of the parts, is B398.8/share. We reiterate our BUY
recommendation due to strong business potential of PTT and its subsidiaries. The current
PER is low at only 8.1x, versus the regional peers’ of 10-11x. The share price has also
been laggard among peers. Moreover, dividend yield is expected at 4% p.a. on average.