The Bangchak Petroleum

The Bangchak Petroleum Plc (BCP)  

 

- Profit to make year’s peak in 2Q15 

We project BCP’s net profit to grow 142.0%qoq to B2.5bn in 2Q15 from the following contributions: 1) stock gain of US$1.15/barrel, versus stock loss in 1Q15, 2) a 5.9%qoq increase in market GRM to US$10.8/barrel, and 3) a 3.0%qoq increase in a refinery utilization rate to 112,000 barrels a day. Overall, 1H15 net profit is estimated at B3.5bn, rising 25.8% from the same period last year and making up 81% of our full-year forecast. 

- Up 2015 forecast to reflect surprising GRM in 1H15 

We increase 2015 earnings forecast by 29.1% to reflect an up revision of GRM assumption from US$6.5/barrel to US$7.5/barrel after the market GRM rose to US$10/barrel in 1H15, which was better than expected; average GRM in 2H15 is anticipated at US$5/barrel because it is a low season of finished oil products. According to the new forecast, 2015 net profit would be B5.7bn, versus B712m in 2014. Yet, in the short term, 2H15 profit may weaken significantly from 1H15 and comprise only 37% of our full-year forecast as a result of a low reason of the refinery business. 

- Hold or switch to IRPC in short term 

Under the new forecast, new 2015 fair value (DCF) is B35.50 (B33.5 previously); the current share price has absorbed positive factors and already exceeded the new fair value. Accordingly, in the short term, we recommend only holding BCP for its dividend yield of 4.2% p.a. or switching to IRPC, which has more than 30% upside. In addition, IRPC’s profit in 2H15 would be less fluctuating than BCP’s thanks to its petrochemical business and a Phoenix project that is finishing late this year.