IRPC

IRPC Plc 

- 4Q14 depressed by stock loss, but normalized profit very good    

 

We project IRPC to face B5.74bn net loss in 4Q14, versus B22m net profit in 3Q14, mainly due to stock loss (LCM included) of US$16.8/barrel or around B9.4bn in total. In terms of normalized operation, however, the company would reverse to be with profit of around B1bn, versus loss of B700m in the previous quarter. 4Q14 would be the first quarter with normalized profit, thanks to GRM and petrochemical spread that has widened from US$2.2/barrel and US$3.3/barrel in the prior quarter to US$4.8 and US$4.6/barrel, respectively. Overall, FY2014 earnings result is estimated with net loss of B5.2bn, worse than our initial forecast for net loss of B3.7bn. 

- Already bottom out. Net profit projected in 2015    

 

We revise down FY2014 earnings forecast to reflect the worse-than-expected earnings in 4Q14. However, we maintain our forecast for FY2015, projecting the company to reverse to show net profit of B2.9bn from UHV (Phonenix Projects) that will commence a commercial run in 4Q15 and thus boost profit margin at least by US$2/barrel, resulting in the market GIM of above US$10/barrel in a normal situation. The UHV project will be recognized for a full year in 2016, which would increase IRPC profit base to above B5bn since 2016 onward. However, for 2015, there would be non-recurring items that we have still not included in our forecast, e.g. remaining insurance claim of B1.7bn and stock gain/loss. 

 

- BUY reiterated    

 

2015 fair value is B3.60. We reiterate BUY since there are still catalysts in 2015. However, as the price has considerably risen, we recommend waiting to buy when it weakens.