PTT

PTT Plc 

Investment thesis

Results in-line

PTT announced a 4Q14 loss of Bt26,649m versus a profit of Bt24,558m for 3Q14. The record loss was in line with our estimate and the street. Yet, PTT’s operational performance remained strong—its core profit inched up by 2.3% QoQ and 31.9% YoY to Bt20,208m, as we had expected. Also, the firm announced a 2H14 DPS of Bt5, which translates into an annualized yield of 2.8% (XD on March 6); our assumption was only Bt3. The payout for 2H14 makes for a full-year DPS of Bt11.  

Results highlights

The negative highlights of 4Q14 were recognition of impairments for both PTT and PTTEP totaling Bt42bn. Losses at refining and petchem subsidiaries also hit hard on the firm’s bottom-line—it reported a net equity loss of Bt10.1bn versus net equity income of Bt3.5bn for 3Q14. The coal operation weakened in tandem with the anemic coal price environment. Coal EBITDA slid by 18% QoQ to Bt940m. In 4Q14, coal price realization dropped to a record low of US$58.7/t from 3Q14’s $62.2/t.  

Gas EBITDA dived 38.9% QoQ to Bt9,680m, due to a one-off adjustment totaling Bt3.9bn. But stripping out the aforesaid extra item, core gas EBITDA was solid. Gas throughput inched up to 4,802mmcfd from 4,731mmcfd the previous quarter. GSP output rose to 1.73mt from 3Q14’s 1.59mt, boosted by a full capacity run at the fifth GSP unit. Retail oil EBITDA flipped into a loss of Bt236m versus a profit of Bt3,126m for 3Q14, due largely to slimmer marketing margin and the booking of an impairment on the retail oil business.    

Outlook

We are optimistic over the 1Q15 bottom-line outlook. Apart from expected bounces across all subsidiaries (we don’t expect any significant further stock losses or impairments), core businesses—particularly gas—will strengthen QoQ on upward adjustments to NGV and LPG prices. Also, declining wellhead gas costs will boost the spread of PTT’s gas pipeline unit.    

What’s changed?

Our FY15 NPAT projection stands unchanged at Bt75,223m for the moment. The variables in our model are skewed toward upside—the planned divestment of stakes in BCP (27.22%), GPSC (30.10%) and SPRC (36%).  

Recommendation

PTT remains our top pick within Thai Energy space. In the prevailing climate of volatile oil prices, it will outperform other Oil &Gas stocks, in our view. Apart from NGV price de-control, FY15 will be a year of unlocking value, providing scope for upside to our earnings forecast.