Thai Oil

Thai Oil Plc (TOP) 

 

- Profit seen in 1Q15 as expected  

 

TOP reported net profit of B4.5bn in 1Q15, close to our projection, rebounding from net loss of B6.5bn in 4Q14 as a result of the following factors: 1) stock loss decreased from US$11.2/barrel in 4Q14 to US$1.5/barrel; 2) market GRM increased 7.3%qoq on seasonal effect to US$8.8/barrel; 3) there was Fx gain of B676m, compared with Fx loss of B548m in the prior quarter. However, TOP’s profit has still been adversely affected by the aromatics business, which has faced a problem of decreasing product spreads. Overall, 1Q15 net profit comprised 44.4% of our FY2015 forecast. 

 

- Normalized profit to weaken continually in the rest of 2015  

 

We maintain our FY2015-2016 profit forecast, projecting normalized profit in 2Q15 to drop slightly from 1Q15 due to decreasing GRM after passing a high season. However, normalized profit in 2H15 would decline significantly from 1H15 because of 1) a low season of refinery in which demands for finished oil usually decrease, 2) significantly increasing finished oil supply of 1.2 million barrels/day in total from new refineries in the Middle East, and 3) new Px supply of 2.6 million tons/year in total. Yet, a positive factor to hope for in 2H15 is stock gain from rising crude oil prices, which has not yet been included in our forecast. Dubai price closed at US$55/barrel at the end of 2014; if the price rises from that level, the company will be able to book stock gain. 

 

- Hold for dividend yield of 4% p.a.  

 

2015 fair value (DCF) is B54. We reiterate to hold TOP for dividend, which is expected at 4.0%p.a.