PTT group earnings to be hit by verdict

In its research, Kim Eng Securities (Thailand) said PTTCH would suffer the most in the PTT Group. In the worst-case scenario, it might be left out of the consolidation with Thai Oil, PTT Aromatics and Refining (PTTAR) and IRPC.

With projects being delayed, the evaluation of a share-swap is impossible. Among the 65 suspended projects, three belong to PTTCH: the manufacturing of 50,000-tonnes of HDPE per annum, a polyethylene expansion project and a subsidiary of Bangkok Polyethylene's HDPE with an expansion capacity of 250,000 tonnes per annum. All these projects could face a delay of six to 12 months.

Meanwhile, PTTCH will be indirectly hit by the delay in other petrochemical projects, which are meant to supply raw materials for plastic-pellet manufacturing.

PTT itself was directly affected by the delay in the US$780-million (Bt25.8 billion) sixth gas-separation plant, which was earlier scheduled to open in the first quarter of next year. The other project that has been delayed is Bisphenol A, which is 40 per cent-owned by PTT and 60 per cent by PTTAR and PTTCH.

PTT will also see low revenue contribution from subsidiaries as well as possible gains from business consolidation. If the delay is for six months, it would shave 4.6 per cent off PTT's earnings, or Bt12 per share. Every month of delay would translate into a 0.77-per-cent effect, or Bt2 per share, according to Kim Eng.

PTTAR has also lost opportunities worth Bt800 million so far from the delayed opening of its third upgrading unit worth $175 million that was completed in March. The cost is based on the forecast extra-refining margin of $2 per barrel.

In case of a six-month delay, PTTAR's 2010 earnings could be reduced by 4.4 per cent, or Bt1.5 per share. Every month of delay means a loss worth 0.77 per cent, or Bt0.25 per share.

The least affected in the group is PTT Exploration and Production. Though the volume of gas sales stays the same due to the suspension of the gas-separation plant, PTT is required to pay advance charges under the take-or-pay contract.

DBS Vickers Ballas Securities expects PTTCH's 2010 earnings will be cut 18 to 26 per cent if its downstream petrochemical projects are delayed by six to nine months. The impact on PTT is expected to be mild, given the large earnings base. Yet, if the gas-separation plant were to be delayed by six to nine months, it would bring the earnings down by 7 to 10 per cent.

Meanwhile, the delay in the PTT Utility project will hurt PTTAR only slightly, because the company can opt to buy power from the Electricity Generating Authority of Thailand and install a steam-generating boiler at its own plant.

If SCG's downstream projects got delayed by six to nine months, the net profit would be cut by 9 to 14 per cent, DBS said.

Regarding SCG, if in the worst-case scenario its projects were delayed by a year, the 2010 net profit would be cut 18 per cent from Bt25.7 billion to Bt21.87 billion, according to Siam City Research Institute. The target price of the company's shares was revised down from Bt285 to Bt260.

In the case of Thai Plastic and Chemicals, an SCG subsidiary, though the vinyl-chloride monomer project and the PVC expansion project have been delayed, the 2010 earnings prospects are intact, as expected revenue from the two projects are not included in the forecast.

However, Asia Plus Securities maintained the earnings forecast for SCG at Bt24.89 billion.