In a research report completed after a company visit, the securities house said the Malaysian refinery was expected to perform a test run in June and could start commercial operations in the third quarter.

The original commercial start target was the first quarter, but this was pushed back due to technical problems and unpreparedness for oil price fluctuations.

"The delay would mean a narrow chance of seeing higher profit margins from the second half onwards," AYS said, adding that the refinery is expected to boost profit margins as Tipco Asphalt will have its own source of asphalt. Importantly, the refinery does not require high-quality crude oil and the operating cost is lower than other asphalt suppliers.

The brokerage said that if commercial operations start in the third quarter, it would take a year before the refinery completes its one-year learning curve. As such, solid benefits to Tipco Asphalt would be delayed to 2008.

The Malaysian refinery, with a maximum capacity of 9 million barrels a year, is now 96-97 per cent complete. It has already ordered 400,000 barrels of crude oil from Venezuela for initial operations.

While saying that it is unclear what the refinery's utilisation rate would be initially, AYS said that if the test run is complete and the machinery is transferred, the refinery would immediately realise the depreciation cost.

"If the refinery's capacity utilisation rate is low, it could show losses and that would affect Tipco Asphalt's finances in the second half," AYS reported, adding that it has not yet factored in this possibility.

Due to its unclear production plan, AYS maintains the view that though the refinery's performance has not been good initially, in the long term it could greatly boost Tipco Asphalt's performance as it would reduce its reliance on asphalt supplies from other suppliers. The firm will also enjoy lower production costs.

AYS expects the company to report slower growth in net profit in the first quarter, following 36-per-cent quarter-on-quarter and 342-per-cent year-on-year increases in the fourth quarter last year. In the fourth quarter, it reported a net profit of Bt135 million.

AYS cites seasonal factors as a reason, as demand in the first quarter is usually low due to fewer contracts from the government sector. It expects Tipco Asphalt's first-quarter results to be 80-100 per cent higher than the same period last year. First-quarter net profit in 2006 was Bt54 million.