PTT
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LPG price hike boosts fair value by Bt19 BUY
PTT Plc
- CEPA approves ex-GSP LPG price restructuring
The Committee on Energy Policy Administration (CEPA) approved yesterday (January
7, 2015) to restructure LPG price in order to reflect the actual global price. Previously
capped at US$333/ton, ex-GSP LPG price has been raised to US$498/ton, effective
from February 2 on; this would directly benefit PTT.
- Revise up FY2015-2016 earnings forecast to reflect
US$498/ton LPG price
As LPG price restructuring directly affects PTT, we revise up FY2015-2016 its earnings
forecast. Previously capped at US$333/ton (or B10.7/kg), ex-GSP LPG price has been
raised to US$498/ton (or B16.1/kg), which is close to the production cost of US$500-
550/ton. As the new ex-GSP LPG price is US$498/ton, PTT's earnings would increase
from the initial forecast by 9.6% in 2015 and 9.8% in 2016.
- New fair value is B394. BUY
Under the new forecast, FY2015 fair value (DCF) is revised up from B375 to B394.
There is also B24 upside from potential NGV price restructuring, which might be
raised from B12.5/kg to reflect the actual production cost of B15.5/kg; this is not
included in our forecast yet. We reiterate BUY
- CEPA approves ex-GSP LPG price restructuring
Yesterday (January 7, 2015), the Committee on Energy Policy Administration (CEPA)
approved to restructure LPG price in order to reflect the actual global price, in line
with the National Energy Policy Council's (NEPC) proposal on December 15, 2014. The
new LPG price calculation formulae are shown below:
1) Ex-GSP LPG price - Previously capped at US$333/ton, it will be raised to
US$498/ton.
2) Ex-refinery LPG price - The formula is changed from
“PG price = (global LPG price x 76%) + (US$333/ton x 24%)” to
“LPG price = (global LPG price - US$20/ton)”
3) Imported LPG price - The new formula is
“Imported LPG price = (global LPG price + US$85/ton)”
At the current global LPG price of US$443/ton, Thailand's average starting LPG price
(weighted average method) is US$487/ton; the new formulae will be effective from
February 2 on. There is no change on LPG retail price.
LPG selling price for household, transportation, industries, and petrochemical
business would be at the same rate. For retail selling price, LPG fund excise levy
(excluded from LPG fund) and marketing cost will also be added. The CEPA will
announce the retail price every month, and factors related to the price will be
recalculated every quarter.
- PTTGC buys LPG from PTT at forward contract price
According to the CEPA, no change was made to PTT’s LPG ex-GSP price for PTTGC,
which means PTTGC would still buy PTT’s LPG at the forward contract price (net back
pricing method), so PTTGC’s share price has a limited downside. However, if global
LPG price rises significantly above PTTGC’s forward contract price, this issue might be
discussed again; this can be a threat in the future.
Under the new ex-refinery LPG price formulae at the current LPG global price, the
new ex-refinery LPG price is close to the initial price, so we maintain the refinery
