Bangchak Petroleum

Bangchak Petroleum Plc (BCP)

- Vigorous rebound foreseen in 1Q14
We estimate 1Q14 net profit at B1.52bn or the aggressive rebound of
121.1%qoq, based on the following factors. 1) Market GRM is projected
to surge 32.8%qoq to US$6.4/barrel as a result of wider finished oilcrude
oil spread on seasonal effect. At the same time, hedge gain and
stock gain have declined to US$0.4/barrel from US$3.3/barrel in the
previous quarter, resulting in net GRM of US$6.8/barrel. 2) Marketing
margin of a retail business increased significantly by 38.8%qoq to
B0.68/liter in this quarter because there was not price competition like
in 4Q13. 3) The company began to recognize income from the 8-MW
solar power plant phase 3 unit 1 since 19 March 2014. 4) A Fx gain of
B270m was booked as a result of the Baht appreciation at end-1Q14.
Overall, 1Q14 net profit would account for 38% of our FY2014 profit
forecast.
- 2Q14 profit to drop slightly from planned shutdown
We project the normalized profit in 2Q14 to weaken from 1Q14 due to a
46-day planned shutdown (1 May to 15 June 2014), which is longer than
a usual overhaul shutdown of 30 days, since the company will have the
fire-damaged refining tower changed, which will also increase its refining
capacity from 80,000 to 100,000 barrels a day. The shutdown in 2Q14
will decrease BCP’s utilization rate by 43.9%qoq to only 55,000 barrels a
day. Nonetheless, this negative factor will be negated by the recognition
of income from all units of the solar power plant phase 3 with total
capacity of 48 MW since late April 2014 onward, which is a few months
earlier than projected, and special insurance claims of B500m for the
property damage (still not included in our forecast). Accordingly, 2Q14
net profit would drop slightly from 1Q14.
- Dividend yield of 5-6% p.a.
2014 fair value (DCF) is B36. We reiterate to buy BCP as the profit in the
next couple years would show continuous and more stable growth after
the company has been able to recognize more income from the solar
power plant which has certain profit as a result of the power purchase
contract. Moreover, dividend yield of 5.4%p.a. can be expected.