Thai Oil

Thai Oil Plc (TOP) 

 

- Net loss anticipated in 3Q15 due to stock, Fx loss  

  We believe TOP could face a net loss of B2.4bn in 3Q15, versus a net profit of B6.2bn in 2Q15, mainly from significant stock loss of B4.5bn and Fx loss of B2.6bn, while there would be compensation from hedging gain of B580m and extraordinary income of B300m from a vessel rental business. Excluding extraordinary items, the company would still be able to show normalized profit of B4.5bn in 3Q15 as market GRM has dropped only US$1/barrel from the prior quarter to US$6.4/barrel, while shared profit from the aromatics and lubricant businesses has stayed close to that of 2Q15, thus keeping market GIM (gross integrated margin) at US$7.9/barrel in 3Q15. Overall, 9M15 net profit is estimated at B8.3bn or a growth of 248.4% from the same period last year, which is 59% of our initial FY2015 forecast. 

- 2015 forecast revised down but profit growth still strong 

  We revise down 2015 profit forecast by 15.4% to B12bn to reflect extraordinary expenses in 3Q15, especially Fx loss. However, net profit is still foreseen in 4Q15 because there will no longer be high stock loss and Fx loss like in 3Q15. According to a new forecast, TOP’s earnings would revert to net profit again in 2015, from a net loss of B4bn in 2014, and continue to show high profit in 2016. 

- Reiterate HOLD for 5% p.a. dividend yield  

  2015 fair value (DCF) is B56. The current share price has already absorbed positive factors until it has a limited upside. We reiterate to hold TOP for dividend or investors can switch to IRPC, which has more than 30% upside and a benefit from Phoenix project that will be finished by the end of 2015 and help enlarge its profit base.