Bangchak Petroleum

Bangchak Petroleum Plc (BCP)

1Q14 posts strong profit growth as expected
- BCP reported 1Q14 net profit at B1.56bn or the aggressive rebound of
126.9%qoq, thanks to the following factors. 1) Market GRM surged
33.0%qoq to US$6.41/barrel as a result of seasonal effect. At the same
time, hedge gain and stock gain declined 73.9%qoq and 92.4%qoq to
US$0.31 and US$0.16/barrel, respectively, resulting in net GRM of
US$6.88/barrel. 2) Marketing margin of a retail business increased
significantly by 36.7%qoq to B0.67/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 March 19,
2014, increasing profit from the power business by 7.0%qoq. 4) A Fx gain
of B247m was booked as a result of the Baht appreciation. Overall, 1Q14
net profit accounted for 38.7% of our FY2014 profit forecast.
- Power business: Hero of 2Q14
We maintain our earnings forecast for FY2014-2015. The normalized profit
in 2Q14 is projected to weaken from 1Q14 due to a 46-day planned
shutdown (May 1 to June 15, 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
only 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.