PTT

PTT Plc
2Q13 profit to drop mostly due to subsidiaries and Fx loss
We project 2Q13 net profit at B16.2bn, falling 54.9%qoq mainly due to implicit decrease
in share of income from subsidiaries and Fx loss: 1) PTTEP 2Q13 earnings report was
B10.7bn, falling 47.4%qoq due to extraordinary expense of Fx loss at B5.14bn.
Excluding the extraordinary item, norm profit fell only 7.3%qoq. 2) Profit from refinery
and petroleum business through subsidiaries e.g. TOP. PTTGC, SPRC, IRPC and BCP
decreased from 1Q13 as market GRM fell along with spread of all finished oil. Moreover,
there was implicit stock loss recognized in 2Q13, along with crude oil price at end-2Q13
that decreased from end-1Q13 by US$7/barrel. Spread in aromatics products that
decreased while spread in olefins slightly products increased, so subsidiaries’ 2Q13 share
of profit fell 88.4%qoq to B1.1bn. 3) Fx loss is projected at B8bn (including PTTEP), as
THB/USD at end-2Q13 weakened from end-1Q13. PTT businesses’ 2Q13 earnings result
are likely to stay close to 1Q13 as increasing sales volume was negated by lower
margin, keeping gross margin at 7.9%. Overall, 1H13 net profit is projected at B52.4bn,
rising 13.8%yoy, making 47% of our FY2013 earnings forecast.
- 3Q13 profit likely to recover in every business
We maintain FY2013 earnings forecast, as 3Q13 norm profit is likely to recover from
2Q13: 1) PTTEP – Sales volume is likely to rise after Montara project starts its
commercial run and Bongkot South, Arthit, B8/32 and 9A projects resume their
production after planned shutdown in 2Q13. Also, (Dubai) oil price is likely to soar above
US$100/barrel, as US’s economic recovery and political conflicts in Middle East countries
would keep oil price high. 2) Refinery –3Q13 GRM is predicted to increase nearly 2x from
2Q13, along with low supply due to unplanned shutdown of 4 refineries in Asia and 2 in
the US, as well as rising demand in the US’s driving season and Ramadan in Indonesia.
Moreover, no massive oil stock loss is projected in 3Q13, like in 2Q13. 3) Petrochemical
– 3Q13 aromatics product price is projected to rise from 2Q13, as new supply from
Tenglong boosting Px at 800,000 ton/year has its commercial run delayed (from May
2013), with no new commercial run scheduled. Moreover, late-3Q13 to 4Q13 will be
production season to prepare for winter and New Year. Entrepreneurs are likely to stock
more feedstock, be it aromatics or olefins. However, PTTGC would be pressed from
planned and unplanned shutdown of petrochemical factory, as well as provision for
leakage incident.
- Recommend “BUY” for long-term strong business growth
potential
We revise end-2013 fair value (DCF, sum of parts) at B398.8/share. We reiterate “BUY”
due to strong business growth potential of PTT and this sector. Also expect dividend
from 4% div yield.