PTT

PTT Plc 

- Impairment charge, stock loss depress PTT, PTTEP's profit in 4Q14   

 

We project PTT to face B28bn net loss in 4Q14 (versus B24bn net profit in 3Q14) as a result of the following factors: 1) PTTEP's B33bn impairment charge from Montara and KKD Oil Sand projects, 2) B20bn stock loss (LCM included), resulting in B10bn share of loss from investment, and 3) PTT's B9.2bn impairment charge. Overall, PTT's FY2014 net profit was estimated at B54bn, plunging 42.5%yoy, lower than our initial forecast. 

 

- Revise earnings forecast from 2015 on to reflect NGV price at production cost     

 

We revise down PTT's FY2014 earnings forecast to reflect potential weaker-than-expected profit in 4Q14, but raise FY2015 net profit projection owing to the following contributions: 1) NGV retail price has been increased for the third time by B0.50/kg to B13.00/kg, likely to be raised by another B2.00/kg to meet the production cost of B15.00/kg; and 2) PTT would recognize B2bn profit from selling of entire shares of 27.22% in BCP. Overall, PTT's earnings forecast is revised up by 6.2% in 2015 and 5.7% in 2016. 

 

- BUY when price weakens   

Under the best-case scenario (LPG and NGV prices are raised to meet the production costs, and downside from FY2014 forecast down revision are included), FY2015 fair value (DCF) is revised up from B394 to B398. We reiterate buying when the price weakens; the price has recently surged and shown only 8% upside (dividend yield included).