PTT to try new scheme to shore up

Although the scheme is expect¬ed to stabilise the share price, bro¬kerages say this is not a good time to launch it, because the foreign selloff is bound to continue fol¬lowing a likely drop in global oil demand, which could weaken oil prices.

PTT president and CEO Prasert Bunsumpun yesterday said buying back shares held by individual investors would be a way to pull up the price to a realistic level. However, the scheme - which will be in accordance with Stock Exchange of Thailand regulations - is not yet finalised.

"Foreign investors have pulled out more than Bt80 billion worth of investment, due to the political problems. This has plunged PTT share prices to a level that does not reflect the company's performance," he said.

In the first seven months of the year, foreign investors showed a net sell position of Bt85.9 billion. PTT, the Kingdom's largest stock by mar¬ket capitalisation, has suffered dearly. In the same period, its share price peaked at Bt382 on May 22 and fell to Bt234 on July 21.

Yesterday, PTT closed at BtXX, down XX per cent from the July 31, 2007, closing price of Bt376. Based on an aver¬age crude price of US$100 (Bt3,400) per barrel, PTT's fair value is expected to be Bt390.73 a share, said Asia Plus Securities.

KGI Securities (Thailand) expects a fair value of Bt430 a share on a crude price of $110 a barrel.

Therdsak Thaveeteeratham, head of research at Asia Plus, said since the share price was now below fundamentals, the treasurystock scheme would sta¬bilise PTT's share price, stemming a further fall. It could also reduce pressure from activists, as more shares would return to the hands of the company, which is now owned about 60percent by the Finance Ministry.

"The timing is wrong. Foreigners could sell more Thai stocks. Based on our estimate, foreign investors are capable of unloading a further Bt50 billion worth. We don't know whether they will sell out all of the shares, but we don't see any reason to encourage them from holding Thai shares any longer," Therdsak said.

He also said gov¬ernment intervention to slow domestic fuelprice increases had also dampened invest¬ment sentiment.

The PTT Group's four refineries were asked to provide diesel at a special price to affected sectors. PTT so far has also shouldered huge costs in importing liquefied petroleum gas cheaply, against a sharp increase in con¬sumption among vehicles and industrial plants, because the gas price is kept much lower than the global price.

Adisak Kammool, an economist and strategist at KGI, said energy stocks were at a volatile stage amid forecasts that oil prices could weak¬en to $70 to $100 a barrel on reduced demand. Meanwhile, the US has tightened its control over oil futures, and this could pressure the physical price of crude oil.

"Fundamentally, PTT is finan¬cially strong, but its position in the next three to six months depends largely on the global crude price. We've yet to see how this will affect PTT," Adisak said.

Adisak also fears the US subprime crisis could worsen and force financial institutions to unload their assets. If the assets cover those in Thailand, PTT could be affected, because most portfolios contain this stock.

He said since no one knows when the US financial meltdown will end, the net selloff could continue. Only when foreigners return to being net buyers for five or six consecutive trading days will we know the sell¬ing has come to an end, he said.