Thai Oil

Thai Oil Plc (TOP)

-1Q14 profit slightly beats projection
TOP reported 1Q14 earnings to turnaround from a net loss of B14m in 4Q13
to a net profit of B2.5bn, slightly better than expected mainly because a
realized Fx gain was larger than forecast. In addition to the Fx gain of B692m,
the company also booked a hedging gain of B602m or an increase of
55.1%qoq. GRM also leapt 168.4%qoq to US$5.1/barrel on seasonal effect.
However, negative factors in this quarter were 1) Px-ULG95 spread that
shrank 38.6%qoq to US$273/ton, forcing TPX to face a net loss of B17m in
1Q14, 2) spread of lubricating oil that decreased 18.2%qoq, lowering TLB’s
profit by 11.4%qoq, and 3) a stock loss of US$1.6/barrel, versus a stock gain
of US$1.5/barrel in 4Q13, making accounting GIM drop 29.7%qoq to
US$4.5/barrel. Overall, 1Q14 profit made up 32.6% of our FY2014 forecast.
- Dreadful outlook in 2Q14 from aromatics and refinery
We maintain our profit forecast for 2014-2015. 2Q14 will be the worst quarter
of the year due to the following reasons: 1) Px-ULG95 spread tends to weaken
33.8%qoq. A new supply of Px of 2.2 million tons is projected in 2Q14, while
PTA production (Px is raw material) would increase only 0.8 million tons. 2) A
55-day major overhaul of CDU-3 distillation unit with a total capacity of
165,000 barrels/day, which would make the utilization rate of the refinery and
aromatics factory lower from 105% and 93% in 1Q14 to 80% and 60%,
respectively. For FY2014, the profit is projected to slump 25.2%yoy from low
aromatics spread, Px in particular. With a projected new Px supply of over 7
million tons/year in 2014 and 3-4 million tons/year in 2015 versus a new PTA
supply of only 4-5 million tons/year, an oversupply is envisaged in the next
couple of years. In addition, a refinery business might be hindered by a major
overhaul.
- Hold for dividend
2014 fair value (DCF) is B56. We reiterate to hold TOP for dividend. 2014-
2015 dividend yield can be expected at 3-4%p.a. (paying semiannually).