The Nation




Price weakens. Strong fundamental factors. Good entry point BUY


- Many factors weakens share price

PTT’s share price has plunged nearly 4% to B292 as a result of the following

rumors: 1) removal of PTT board chairman (Parnpree Bahiddha-Nukara) and

the whole board of director; and 2) the energy reform previously announced

by the National Centre for Peace and Order (NCPO). According to our

interview with PTT executives, neither Parnpree nor any board of director

members would be removed in near future. PTT is a listed company on the

Stock Exchange of Thailand. Removal of board of director members takes

time because it depends on shareholders’ meeting and its own rules and


- Fundamental factors not affected

We project that PTT’s fundamental factors would not be affected by the

rumors on removal of PTT board chairman or the energy reform (PTT has

been criticized that the price has far exceeded the global oil price). Current

retail oil price comprises refinery transfer price (depends on global oil price;

PTT benefits from this) and taxes (30-40% of retail oil price at petrol station;

the government benefits from this). The government maintains diesel price

at B30/liter. If oil price needs to be restructured, we expect taxes to be

lowered. Even though income from energy business makes up 70-75% of

PTT’s total income, PTT’s earnings before interest and taxes (EBIT) from

energy business makes up only 5-8% of PTT’s total profit; reflecting low

profit from energy business. Currently, PTT has to sell LPG (from gas

separation plants) at US$330/ton (lower than global LPG price at US$700-


- Great entry point

We maintain FY2014 fair value (DCF) at B360. We reiterate to buy; share

price has been lowered by rumors, so this is a good entry point. Expected

P/E ratio of 8.3x is the lowest among peers (versus the sector’s average of

11.5x). Its dividend yield can be expected at 4-5%p.a.

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