PTT Plc

PTT Plc

- 4Q13 profit not good. Share of profit from subsidiaries to fall
We project PTT's 4Q13 net profit at B15.5bn, contracting 49.7%qoq as a result of
the following factors: 1) Share of profit from subsidiaries is projected to fall by
60.5%qoq. 4Q13 profit from refinery business (TOP, PTTGC, SPRC, IRPC and BCP)
has been affected by averagely US$1/barrel decrease in GRM. Spread of benzene
products would drop significantly, and stock gain is likely to decrease. Moreover,
PTT would to be pressed severely by Fx loss, as THB has depreciated by
4.67%qoq. On the contrary, 4Q13 net profit from petrochemical business is
projected to rise slightly qoq, as olefins spread has rebounded continuously. 2)
PTTEP's net profit has dropped by 58.3%qoq, mainly because of Fx loss and high
tax expense. 3) PTT is projected to recognize B5.6bn loss in 4Q13 (versus B2.0bn
Fx gain in 3Q13). However, PTT's earnings would be prosperous again in 4Q13.
Sales volume of products from gas separation plant is projected to grow by
4.7%qoq after GSP#5 could resume its production at 50% of its capacity for a full
quarter. Moreover, spread of products from gas separation plant is expected to
rise by 5%qoq. Overall, PTT's FY2013 net profit is projected at B94.8bn, falling
9.6%yoy (3.6% lower than our previous forecast).
- Revise down FY2014-2015 earnings forecast
We revise down FY2014-2015 earnings forecasts as we cut the following
assumptions: 1) Sales volume of natural gas and gas separation plant products is
projected to grow by 1.5% and 2.5%, respectively (preliminarily expected at 3%
and 5%) to reflect the slowing economy and gradual global economic recovery. 2)
Profit margin of gas separation plant products is projected at 3% lower than the
previous forecast, reflecting that petrochemical product prices are not as high as
preliminarily expected. 3) Share of profit from subsidiaries (e.g. TOP and BCP) is
likely to fall. Overall, FY2014-2015 net profit is revised down by 10.1% and
13.8% from the previous forecast, but is still the growth of 14.0%yoy and
6.2%yoy, respectively. In 2014, all PTT's factory would be ready to run at their
full capacity, boosting growth. Moreover, olefins spread is expected to increase.
- "BUY". Low PER, over 5%p.a dividend yield
Under the new forecast, we revise down end-2014 fair value (DCF, sum of parts)
from B420 to B368. We reiterate "BUY" for 36% upside, FY2014 PER at 7.2x
(versus the sector's average PER of 10x), and dividend yield expected at 5%p.a.
Moreover, the share price is substantially laggard peers.