Thai Oil

Thai Oil Plc (TOP)

 

- LAB and SPP investments to increase GIM in 2016 

There was nothing new from the analyst meeting. TOP is moving forward with its short-term plan, which is expanding investment in the two following projects. 1) The company is investing on production of linear alkylbenzene (LAB), an initial substance for detergent, at a capacity of 100,000 tons a year. This is an add-on project for its aromatics business, using benzene to produce LAB, for which Thailand is currently a net importer. A commercial production is anticipated at the end of 2015 and it would help increase TOP’s GIM by US$0.4-0.6/barrel. 2) The company is investing in a small power project (SPP) with a total capacity of 239 MW and a steam production capacity of 498 tons per hour; TOP has entered 80% of its power production from the SPP into a power purchase agreement with EGAT, while the rest 20% will be used by TOP factories. A commercial run is anticipated in 2Q16. 

- Stock gain to sustain profit in the rest of 2015 

We maintain our FY2015-2016 profit forecast, projecting normalized profit to weaken in 2H15. Profit in 2Q15 would stabilize due to a benefit from annual maintenance shutdowns of many refineries and aromatics plants worldwide and an operation halt of Dragon Aromatics plant after a blast accident in early April. However, normalized profit in 2H15 would decline significantly from 1H15 because of 1) a low season of refinery and 2) significantly increasing finished oil supply from new refineries and aromatics supply from new plants. Yet, a positive factor to hope for is stock gain from rising crude oil prices in 2Q15 and 2H15, which has not yet been included in our forecast.  

- Hold for dividend yield of 4.1% p.a. 

2015 fair value (DCF) is B54. We reiterate to hold TOP for dividend yield, which is expected at 4.1%p.a.