PTT

Q4 2012 profit projected to weaken due mainly to PTTEP, but returning in Q1 2013 BUY

PTT Plc

Q4 2012 profit projected to drop 35.3% QoQ due mainly to PTTEP and refinery

PTT's 4Q12 net profit is projected at B23.3bn or 35.3% QoQ decrease due

mainly to the following reasons. 1) PTTEP's 4Q12 profit has dropped by 21.4%

QoQ to B13.8bn mainly as a result of B3bn asset impairment of Montara

project in Australia. This is a result of postponement of commercial production

to end-1Q13 (previously, the production was planned to begin in 4Q12) which

made the cost of project increase. Moreover, the production cost has also

increased by 14.6% QoQ. 2) There is projected to be stock loss of US$2/bbl

(along with the average Dubai crude oil price in December that fell to

US$106/bbl from the average in September at US$111/bbl), flipping from

stock gain of US$5-6/bbl in 3Q12. Other than that, the market GRM is

projected to decrease by 29% QoQ to US$5/bbl along with the weakness of

gross refining margin. However, the spread of petrochemical products has

enlarged, special thanks to aromatics. Accordingly, the profit sharing from

subsidiary has decreased by 61.4% QoQ to B5.1bn. 3) The profit from gas

separation plant is projected to descend due to the pool price that has

increased by 11.4% QoQ to the average US$390/ton which is in keeping with

increased selling price of gas from resources such ash Unicoal and Pailin. In

terms of the price and sales volume, they have increased only slightly. 4) The

company is projected to recognize stock loss from PTT by B1.15bn compared

with B245m of 3Q12 profit. 5) The stock loss from NGV has risen by 3.8%

QoQ to B5.2bn. 6) The FX gain is projected to drop by 57% QoQ to B1.4bn.

Overall, PTT's 2013 net profit would stand at B105bn, stabilizing from the

prior year but is still beyond our projection.

Likely to revise up 2013-14 profit forecast, reflecting earlier increased profit of PTTEP

We're likely to revise up 2013-14 forecast after an announcement of 2012

operating result to reflect the subsidiaries' profit like PTTEP that has revised

up the assumption of selling gas price and the petrochemical that has revised

up the assumption of petrochemical product spread. However, the company's

norm profit in 1Q13 is believed to return to grow from 4Q12 due to the

petroleum sales volume that is projected to grow continuously and the profit

from gas separation plant that is projected to increase along with the product

prices. Furthermore, the profit of subsidiaries is projected to grow from 4Q12.

PTTEP's sales volume is likely to enlarge after the maintenance shutdown of

some plants in 4Q12. In late-1Q13, Montara project is projected to begin

commercial operation as planned. In terms of TOP and PTTGC, 1Q13 profit is

projected to return to grow outstandingly once again due to the spread of

especially aromatics that is in a substantially high level and olefins that still

has gradually improved. At the same time, sales are projected to heighten

from 4Q12 because there is no plan of maintenance shutdown. In addition,

PTTGC's l4-1 plant has already resumed operation as normal.

Recommend "BUY"… share price still laggard. Notable dividend yield

The fair value, using DCF and sum of the parts, at end-2013 stands at

B420.10/share. We reiterate our recommendation of "BUY" due to the

company's potential growth of business. Moreover, the share price is found

earlier to be considerably laggard compared with peers. For the return from

dividend yield, it could be expected at 4% p.a. in average.