Securities house: Thanachart Securities

The anti-privatisation petition will demand the court revoke two Royal Decrees which supported PTT's privatisation, asserting procedural impropriety; target PTT's failure to separate its gas pipeline business; and point to the claims for damages resulting from the privatisation of the Petroleum Authority of Thailand.

The broker believes PTT will be able to mount a very solid defence against the charges, but there is a risk its share price will soften given the high degree of uncertainty.

As for the separation of its gas pipeline business, PTT may have to pay tax of Bt10 billion, or Bt3.6 per share in the worst-case scenario.

Regarding the claim that two members of PTT's privatisation committee - Manoon Leopairote and Viset Choopiban - had conflicts of interest, the broker believes that it is not sufficient ground to use the issue to revoke the privatisation decrees.

While Manoon was head of the privatisation board committee, he was also an Industry Ministry permanent secretary. As a civil servant, he is not prohibited from holding shares, according to Article 12 of the Privatisation Act. In Viset's case, he was Petroleum Authority of Thailand president before the privatisation and the broker believes he was appointed a member of the privatisation committee to act as a representative of the organisation.

The broker has set a target price of Bt270 for the stock.

Stock: Bank of Ayudhya (BAY)

Recommendation: Trading buy

Securities house: Kim Eng Securities (Thailand)

Bank of Ayudhya shares jumped 6.4 per cent last week after rumours of a planned merger with GE Money Retail Bank. Despite this rise, the broker believes BAY still has an attractive valuation trading.

The bank's management has recently said there is no merger deal between it and the General Electric subsidiary, although it has been talking to two or three strategic investors.

The broker believes BAY is still attractive to foreign investors due to its current trading price, a wide network on the universal banking platform, a foreign stake-holding limit that can be expanded to 49 per cent from the current 32 per cent, and improved profitability from its loan-book expansion.

The bank is estimated to post a first-quarter net profit of Bt1.77 billion, up 27.3 per cent quarter on quarter and 16.4 per cent year on year. This will come from an increase in net interest income following credit expansion. The net interest margin should be maintained at a high level of 2.9 per cent this quarter, compared with 3.1 per cent in the previous quarter and 2.6 per cent in the same period last year.

The broker has raised its 2006 earnings forecast for BAY by 11.9 per cent to Bt6.9 billion, due to the improved profitability from both interest income and fee-based income, especially from bancassurance and cash management services.

The broker has increased its fair value estimate for the stock to Bt21.

oranan@nationgroup.com.