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Thai Oil

Profit to weaken in 2Q14 and hit bottom in 3Q14 HOLD

Thai Oil Plc (TOP)

TOP's profit in 2Q14 is projected to weaken only 15.5%qoq despite

surrounding negative factors, thanks to stock gain. However, the

profit might fall to a year's trough in 3Q14. Hold for dividend.

- 2Q14 profit to drop 15.5%qoq

We estimate 2Q14 net profit at B2.14bn, dropping only 15.5%qoq thanks to

stock gain of US$1/barrel, versus stock loss of US$1.7/barrel in the prior

quarter. On the other hand, negative factors in 2Q14 are 1) a major

shutdown of TOP's refinery and aromatics factory since June 15, 2014, 2) a

projected 20.0%qoq decrease in the market GRM, 3) a projected 60.3%qoq

decrease in product-to-feed margin (P2F) of aromatics, and 4) rising

operating cost and depreciation cost. Overall, 1H14 profit is projected to

grow 67.0%yoy and account for 60.2% of FY2014 forecast.

- Profit to make year's low in 3Q14

We maintain our FY2014 profit forecast. The profit might hit the year's low

in 3Q14 mainly because the above-mentioned 40-day major turnaround of

the refinery during the quarter will lower the utilization rate. Another

negative factor is the market GRM that would weaken on seasonal effect

and from the sluggish Chinese economy. The aromatics business would

remain dull; new Px supply of 4 million tons a year is projected in 2H14,

mounting the total new supply in 2014 to 8 million tons a year, while the

average demand growth is only 2.4 million tons a year. Overall, FY2014

profit would decrease 25.3% yoy.

- Hold for dividend

2014 fair value (DCF) is B56. We recommend only holding TOP for its

dividend, which can be expected at 3-4% p.a. in 2014-2015 (paying


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