Its nine-month net income should then be Bt24.3 billion, down 10.4 per cent year on year and 77 per cent of the securities company's 2006 earnings estimate.

However, Phatra believes earnings have peaked for this mini-cycle and expects them to soften in the fourth quarter. It also anticipates SCC earnings will decline by 7 per cent in 2007, assuming lower HDPE (high-density polyethylene)-naphtha spreads.

Due to the regional annual maintenance of HDPE-naphtha plants, which requires a temporary shutdown, the price remains high at US$810 (Bt30,300) per tonne, but after November, when these plants reopen, it should weaken to slightly above $650 in the fourth quarter.

Phatra says SCC's earnings are very cyclical due to chemical spreads as the chemical division accounts for 48 per cent of net income this year.

"As we see spreads declining in the near term, we expect earnings to soften accordingly. Note that every change in HDPE-naphtha spreads by $10 per tonne affects the 2007 earning estimate by Bt1 billion, or 3.4 per cent," Phatra said in its research paper.

While domestic sales in the cement business weakened due to the rainy season in the quarter, they should be offset by stronger export sales volume at higher prices.

Meanwhile, SCC's paper business is expected to show improvement in both revenue and earnings from better volume sales.

"However, margins will remain under pressure from rising long-fibre pulp prices, which should be offset by cost savings from the commissioning of a coal-fired boiler from UPPC [in the Philippines] in the second quarter of this year," it said. Phatra said the boiler should save about Bt75 million per quarter.

Phatra estimates a fair value for SCC stock at Bt266 for local shares and Bt280 for foreign shares.

This suggests that the prices of local and foreign shares could rise by only 8 per cent and 4 per cent, respectively.

"As SCC is a conglomerate, we have applied a 20-per-cent conglomerate discount to its value," it said.