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Bangchak Petroleum

Pure refinery with aggressive growth in 1Q14 BUY

Bangchak Petroleum Plc (BCP)

- Vigorous rebound foreseen in 1Q14

We estimate 1Q14 net profit at B1.52bn or the aggressive rebound of

121.1%qoq, based on the following factors. 1) Market GRM is projected

to surge 32.8%qoq to US$6.4/barrel as a result of wider finished oilcrude

oil spread on seasonal effect. At the same time, hedge gain and

stock gain have declined to US$0.4/barrel from US$3.3/barrel in the

previous quarter, resulting in net GRM of US$6.8/barrel. 2) Marketing

margin of a retail business increased significantly by 38.8%qoq to

B0.68/liter in this quarter because there was not price competition like

in 4Q13. 3) The company began to recognize income from the 8-MW

solar power plant phase 3 unit 1 since 19 March 2014. 4) A Fx gain of

B270m was booked as a result of the Baht appreciation at end-1Q14.

Overall, 1Q14 net profit would account for 38% of our FY2014 profit

forecast.

- 2Q14 profit to drop slightly from planned shutdown

We project the normalized profit in 2Q14 to weaken from 1Q14 due to a

46-day planned shutdown (1 May to 15 June 2014), which is longer than

a usual overhaul shutdown of 30 days, since the company will have the

fire-damaged refining tower changed, which will also increase its refining

capacity from 80,000 to 100,000 barrels a day. The shutdown in 2Q14

will decrease BCP's utilization rate by 43.9%qoq to only 55,000 barrels a

day. Nonetheless, this negative factor will be negated by the recognition

of income from all units of the solar power plant phase 3 with total

capacity of 48 MW since late April 2014 onward, which is a few months

earlier than projected, and special insurance claims of B500m for the

property damage (still not included in our forecast). Accordingly, 2Q14

net profit would drop slightly from 1Q14.

- Dividend yield of 5-6% p.a.

2014 fair value (DCF) is B36. We reiterate to buy BCP as the profit in the

next couple years would show continuous and more stable growth after

the company has been able to recognize more income from the solar

power plant which has certain profit as a result of the power purchase

contract. Moreover, dividend yield of 5.4%p.a. can be expected.


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