PTT Exploration and Production
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3Q14 profit depressed by oil price and write-off BUY
PTT Exploration and Production Plc (PTTEP)
- 3Q14 net profit to fall 31.8%qoq
We estimate 3Q14 net profit at B12.4bn or a fall of 31.8%qoq as a result of
the following factors. 1) There is not a non-recurring profit of over B3.3bn
like in 2Q14. 2) Average petroleum selling price is projected to decrease
3.8%qoq to US$65.1/barrel. 3) Write-off expense is projected to double
from the prior quarter to B3.5bn. 4) There is Fx loss of B876m, versus Fx
gain in 2Q14. Overall, 9M14 net profit is projected at B43bn, decreasing
11.7% from the same period last year and representing 64% of our FY2014
profit forecast.
- 2014-2015 forecast cut likely
We are reviewing FY2014-2015 profit forecast to reflect the actual
performance. FY2014 forecast may be revised down by 13%, while new
FY2015 forecast depends on Dubai crude oil price assumption (currently at
US$100/barrel). According to our study, every US$5 decrease in the oil
price assumption would lower PTTEP’s fair value by B10/share. Details of
the forecast revision will be presented later. However, profit in 4Q14 is
projected to improve slightly from 3Q14 from growing selling volume and
hedging gain, while decreasing write-off expense would help compensate for
the petroleum selling price that is anticipated to drop following decreasing
global crude oil price.
- Share price already reflects weak oil price
Preliminarily, we maintain 2014 fair value (DCF) at B195/share, with P/E
ratio of 8.9x in 2014 and 7.9x in 2015, versus 10.9x of the regional
average. Dividend yield can be expected at 4.5% p.a. on average.
Moreover, the share price has weakened by 5% over the past month,
already absorbing the decreasing global crude oil price. We recommend
BUY.
