Stock focus :Thai Oil Plc
Phatra Securities has recommended investors to buy Thai Oil's stock with a 12-month target price of Bt81 per share.
Its rating is based on the stock's attractive valuation, complex refining facility, diversified revenues and strong support from its parent, PTT Plc.Thai Oil's third-quarter net profit after tax is expected to drop 48 per cent quarter on quarter and 42 per cent year on year to Bt3.6 billion. The key culprit is a decrease in refining margin (GRM) despite a solid showing from its petrochemical subsidiaries, which should help significantly. Thai Para-Xylene in particular enjoyed a significant jump in margins, which reached US$740 (Bt27,705) per tonne - a rise of 83 per cent quarter on quarter and 182 per cent year on year. Thai Oil's refining business is expected to report a soft result in the third quarter, with realised GRM of $3.4 per barrel (including $2 per barrel of inventory loss) or a 68-per-cent decrease quarter on quarter. Its poor refining performance is similar to other refiners around the region. The broker expects the gross profit from the refining business to decline from Bt6.3 billion to Bt738 million - an 88-per-cent decrease quarter on quarter. The broker has started to see a gradual rebound in GRM due to stronger demand and the end of inventory adjustment. The broker also expects some pull-back in petrochemical spread, but the number should remain high in the fourth quarter.
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