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PTT Global Chemical

BUY

PTT Global Chemical Plc (PTTGC)

- Aromatics GRM and spread press 4Q13 profit

PTTGC’s 4Q13 net profit was B7.4bn, contracting 22.8%qoq as expected. Profit

from aromatics business dropped as Px-Condensate spread decreased by

1.4%qoq to US$504/ton. Moreover, PTTGC’s stock gain decreased qoq, and Fx

loss increased by four folds qoq to B976m due to 4.67%qoq THB depreciation.

However, olefins business compensated for negative factors in 4Q13. 4Q13

olefins production volume increased as an olefins plant has been able to resume

its utilization rate at 90% after the GSP#5 could feed raw material at 50% of its

capacity and LDPE plant has resumed its 76% capacity after stopping in 3Q13.

Also, 4Q13 average spread of olefins products increased. Overall, FY2013 net

profit was B33bn, falling 3.9%yoy.

- Strong refinery and olefin businesses in 1Q14

We project 1Q14 net profit to rebound from 4Q13 mainly because of the refinery

and olefins petrochemical businesses. For the refinery business, GRM is

projected to rise on seasonal effect, reflecting from Singapore GRM since the

beginning of 2014 until present that increases by 54%qoq to the average of

US$6.6/barrel. Moreover, many refineries worldwide would have an annual

shutdown in late 1Q14 after running at their full capacity during winter, so some

supplies would disappear. Similarly, spreads of olefins products since the

beginning of the year have increased averagely by 5percent from 4Q13, reflecting

rebounding demands. FY2014 profit is expected to grow 12.0%yoy due to full

resumption of every plant after the planned and unplanned shutdowns in 2013.

Furthermore, as we project olefins petrochemical spread to stay flat from 2013

under a conservative method, there is significant upside that the spread might

increase from the current forecast since a new supply of olefins in 2014 and

2015 would increase only 460,000 and 450,000 tons, versus five to six million

tons a year of demand growth, thus likely benefiting the product price and

spread in the next couple of years.

- "BUY". 2H13 dividend yield at 2.5%

We derive end-FY2014 fair value (DCF) at B91.78, reiterating "BUY". PTTGC is

refinery and petrochemical sector’s top pick for 27% upside and FY2014 PER of

8.8x (lower than the sector’s average of 12x). PTTGC’s 2H13 dividend is

B1.78/share (2.5% dividend yield). XD date is 3 March 2014, and dividend will

be paid on 25 April 2014.


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