PTT

Abundant upside for 2015 profit BUY

PTT Plc

- Petroleum price to weaken in 2015

Petroleum product price in 2015 tends to weaken from 2014. Global crude

oil price has decreased as a result of increasing shale oil production in the

US and excess production of the OPEC. Accordingly, crude oil supply in 2015

is projected to grow 1.8 million barrels/day, compared with the demand

growth of 0.9 million barrels/day, which means an oversupply of around 1

million barrels/day. Likewise, LNG price is projected at US$13.5-14.5/million

BTU, falling sharply from US$15/million BTU in 2015 and US$16.23/million

BTU in 2012. On the other hand, petrochemical spread would stay flat from

2014 for both olefins and aromatics.

- Sales growth and energy price restructuring benefit 2015

We maintain our FY2014-2015 forecast, based on assumption for Dubai

crude oil price of US$100/barrel in 2014 and US$90/barrel in 2015.

Although the crude oil price may weaken in 2015, PTT’s profit in 2015 would

be able to show continuous growth of 5.1%yoy in 2015, from 4.6%yoy in

2014, due to increasing sales of many businesses. Moreover, loss from NGV

sales would decrease by B4bn a year as NGV price has been raised by B1/kg

to B11.50/kg (effective since October 1, 2014). In addition, there are also

upsides from an increase of ex-gas separation plant LPG price and gain from

BCP share selling and SPRC and GPSC listing in the SET, which we have still

not included in our forecast.

- Abundant upside for 2015 profit

2015 fair value (DCF) is derived at B405. We recommend buying PTT when

the price weakens since it has been rising in the past one month until there

is only 5.5% upside left. Dividend yield can be expected at 4%p.a. on

average. There are also additional upsides from the energy price

restructuring and extraordinary profit from subsidiaries, i.e. BCP, SPRC, and

GPSC.