Thai Oil

Thai Oil Plc (TOP)

TOP’s profit in 2Q14 is projected to weaken only 15.5%qoq despite
surrounding negative factors, thanks to stock gain. However, the
profit might fall to a year’s trough in 3Q14. Hold for dividend.

- 2Q14 profit to drop 15.5%qoq

We estimate 2Q14 net profit at B2.14bn, dropping only 15.5%qoq thanks to
stock gain of US$1/barrel, versus stock loss of US$1.7/barrel in the prior
quarter. On the other hand, negative factors in 2Q14 are 1) a major
shutdown of TOP’s refinery and aromatics factory since June 15, 2014, 2) a
projected 20.0%qoq decrease in the market GRM, 3) a projected 60.3%qoq
decrease in product-to-feed margin (P2F) of aromatics, and 4) rising
operating cost and depreciation cost. Overall, 1H14 profit is projected to
grow 67.0%yoy and account for 60.2% of FY2014 forecast.

- Profit to make year’s low in 3Q14
We maintain our FY2014 profit forecast. The profit might hit the year’s low
in 3Q14 mainly because the above-mentioned 40-day major turnaround of
the refinery during the quarter will lower the utilization rate. Another
negative factor is the market GRM that would weaken on seasonal effect
and from the sluggish Chinese economy. The aromatics business would
remain dull; new Px supply of 4 million tons a year is projected in 2H14,
mounting the total new supply in 2014 to 8 million tons a year, while the
average demand growth is only 2.4 million tons a year. Overall, FY2014
profit would decrease 25.3% yoy.

- Hold for dividend
2014 fair value (DCF) is B56. We recommend only holding TOP for its
dividend, which can be expected at 3-4% p.a. in 2014-2015 (paying
semiannually).