Thai Oil

Thai Oil Plc (TOP)  

- B6.4bn loss projected in 4Q14      

 

We predict TOP to face net loss of B6.4bn in 4Q14, versus B2.2bn net loss in 3Q14, mainly because of estimated stock loss (LCM included) of as much as US$13.5/barrel or B11.5bn in total and spreads of aromatics products, both paraxylene and benzene, that have fallen more than 31.9%qoq and 36.7%qoq, respectively. Compensating factors in this quarter, however, are market GRM that is projected to increase 78.0%qoq to US$8.2/barrel and utilization rates of the refinery and aromatics plant that would return to normal. Overall, we project TOP to post net loss of B3.98bn in FY2014, 

12.1% lower than our forecast, versus net profit of B10.4bn in FY2013.   

 

 Net profit expected in FY2015      

 

We project TOP to revert to net profit in 1Q15. GRM tends to remain high near that of 4Q14 as a result of a winter season in many areas worldwide, while there is also benefit from significantly decreasing fuel loss and premium. Moreover, stock loss is projected to decrease because the oil price has had more limited downside. Profit is still anticipated in the other three quarters of 2015, mainly from resumption of TOP’s refinery and aromatics factory at a full capacity, so we maintain our FY2015 forecast. However, we have still not included stock gain/loss in the forecast.  

 

- Downgrade to HOLD. Switch to PTTGC     

 

We derive 2015 fair value (DCF) at B48. However, as the share price has risen significantly over the past week until exceeding the fair value, we downgrade our recommendation for TOP from BUY to HOLD or recommend switching to PTTGC(FV@B68), which is the most laggard stock in the sector.