PTT

PTT Plc

- Profit to rebound in 1Q14
We estimate 1Q14 net profit at B26.2bn, growing 70.0%qoq due to the
following factors. 1) Shared profit from subsidiaries has risen 58.0%qoq
mainly from the refinery business (TOP, PTTGC, IRPC, and BCP) as GRM has
increased US$1-2/barrel on seasonal effect. In addition, the 1.1%qoq Baht
appreciation has made a Fx loss in 4Q13 turnaround to a Fx gain in this
quarter. However, profit from the petrochemical business in 1Q14 would
decline from the prior quarter as a result of a 30%qoq fall in aromatics
spread, while olefins spread would improve only slightly. 2) PTTEP’s profit
would grow 67.4%qoq due to the significantly lower Fx loss. 3) Profit from
the gas separation plant (PTT) is projected to improve, thanks to rising
product price and decreasing cost, so the overall spread would advance by
5.1%qoq, while sales volume would rise only slightly. 4) A Fx gain of B1.3bn
would be recognized in this quarter, versus the high Fx loss in the prior
quarter. Overall, 1Q14 net profit would account for 24.2% of our FY2014
profit forecast.
- Cut forecast for disappointing aromatics business
We revise down our profit forecast for 2014-2015 in order to reflect the
disappointing aromatics business. Since the beginning of 2014, Px-ULG95
spread has fallen to a three-year low of US$165/ton in late March 2014. We,
therefore, slash our assumption for Px spread of TOP (aromatics makes up
30%) and PTTGC (aromatics makes up 25%). As a result, 2014 and 2015
profit lowers 3.7% and 3.2% from the previous forecast. Nevertheless,
continuous growth of 10.0%yoy and 6.7%yoy is still foreseen, respectively.
Major driving factors for 2014 are the resumption of all production units of
PTT and wider olefins spread.
- Low P/E ratio and laggard price
Under the new forecast, 2014 fair value (DCF and sum of parts) is B360
(versus B368 previously). We reiterate to buy PTT as it still provides 17%
upside and 2014 P/E ratio is low at only 8.5x, versus the regional average of
11x. Dividend yield can be expected at 4-5% p.a. Also, the share price is still
laggard peers.