Brokers unfazed by ptt's expected q4 loss

Even though oil and gas giant PTT is expected to report its first quarterly net loss ever - Bt12 billion to Bt15.67 billion in the fourth quarter last year brokers are still bullish on the stock, believing its current price has already factored in negative news.

Bualuang Securities estimates that the country's largest oil and gas firm would post a net loss of Bt13.8 billion, assuming PTT's refin¬ing and chemical units record a combined net loss of Bt47.5 billion, which implies losssharing to PTT of Bt20.2 billion.

PTT's refining and petrochemi¬cal units are Thai Oil, Bangchak Petroleum, IRPC, PTT Aromatics and Refining, Star Petroleum Refining and PTT Chemical.

The firm's core gas business is likely to soften on seasonally low demand for gas and falling produc¬tion at its gas separation plant units causing PTT Chemical's operable capaci¬ty to decline, the brokerage said.

"There is also further downside risk to fourthquarter earnings in the form of potential markedtomarket losses on crude inventories," it said.

Assuming a fourthquarter net loss of Bt13.8 billion, the fullyear earnings forecast has been cut by 31 per cent to Bt60.07 billion from Bt97.80 billion in the previous year.

PTT's 2009 and 2010 earnings projection have also been slashed by 28 per cent and 29 per cent to Bt60.87 billion and Bt65.99 billion, respectively.

"Our downgrades reflect WTI crude assumptions that have been revised back to US$55 for 2009 and $60 for 2010 (from $83 and $85 previously) and recent downward revisions to our PTT Exploration and Production profit fore¬casts.

"Besides, slowing electricity demand growth will impact on PTT's gas sales outlook - we have slashed our average gas sales assumption for 2009 to 3.6 billion cubic feet per day (from 3.65bmcfd previously), basically flat growth yeartoyear (2008's was 3.55bmcfd), the brokerage said.

Given grim 2008 earnings in all PTT's businesses, a dividend cut is almost certain. With the firm's net debttoequity ratio at a low 0.4, and cash on hand of Bt65 billion, PTT could accommodate a higher payout ratio, however.

PTT is expected to pay an annu¬al dividend of Bt9.60 per share, of which Bt6 was already paid for the first half and Bt3.60 will be paid for the second half.

The dividend anticipates that the payout ratio would be increased to 45 per cent from 33 per cent in the previous year.

To reflect its earnings revision, Bualuang Securities has cut its tar¬get price for PTT this year from Bt220 to Bt210.

"Nevertheless, PTT remains our preferred pick within the SETlist¬ed O&G space. The downtrend in energy prices should make the firm more attractive in relative terms because it is a diversified asset play, so its earnings are the least deter¬mined by fluctuating [or falling] oil prices," Bualung Securities said.

The broker has reiterated a "buy" for PTT's stock.

PTT's stock yesterday fell …per cent to close at Bt…

Asia Plus Securities is less pes¬simistic, predicting that PTT would deliver a net loss of Bt12 billion between October and December of last year.

PTT's refining units are expect¬ed to hit PTT's fourthquarter earn¬ings the hardest due to their hefty oil inventory loss in the second half.

The operating losses at its petro¬chemical units and the weakened earnings of PTT Exploration and Production also exacer¬brated PTT"s fourthquarter bot¬tom line.

The securities house has cut its 2008 earnings estimate by 33.4 per cent from 92.40 billion to Bt61.53 billion.

It has trimmed its 2009 earnings forecast for PTT by 35.3 per cent from Bt85.32 billion to Bt55.19 bil¬lion to reflect the plunge in oil and petrochemical product prices, and gross refining margin.

"According to the revised esti¬mate under the DCF [discounted cashflow] method, PTT's stock is at Bt214.29 each. We still recommend to buy the stock, as we believe that fourthquarter earnings will bot¬tom out.

It is highly likely for PTT's refin¬ing units to book oil inventory gains in 2009," the brokerage said.

PTT would pay at least Bt2 per share to stockholders for its secondhalf earnings after giving them Bt6 per share for the firsthalf operat¬ing results.

Siam City Research Institute is the most pessimistic among bank research houses by projecting that PTT would announce a net loss of Bt15.67 billion in the fourth quar¬ter.

It has estimated that PTT's 2008 earnings would drop 40 per cent to Bt57.97 billion.

PTT's fair value is estimated by the research institute at Bt196.

ACL Securities forecasts that PTT in the fourth quarter would post a normalised loss of Bt14.16 bil¬lion, assuming that losssharing from its subsidiaries and affiliates would amount to Bt27 billion.

PTT's 2008 normalised profit estimate has been revised down by 31.2 per cent to Bt57.34 billion.

Even though PTT's refining units in 2009 would reverse to record an oil inventory gain, the weak earnings of PTT Exploration and Production and PTT Chemicals would still put pressure on PTT's 2009 earnings.

PTT's 2009 normalised profit forecast has been revised downward by 23.8 per cent to Bt62.83 billion.

To reflect PTT's weakening earn¬ings, ACL Securities has cut the fair value estimate for PTT this year from Bt246 to Bt224 each.