Optimism is running high for energy stocks as most of their approved projects in Map Ta Phut are expected to resume operations by the end of this year, with PTT and Siam Cement likely to shine the most, stock analysts said last week.
"This is positive for PTT, PTT Chemical (PTTCH) and Siam Cement (SCC). The commercial start-up of the sixth gas separation plant should contribute Bt6.5 billion, or a 9-per-cent increase, to PTT next year, and PTTCH by Bt2.5 billion, or an 18-per-cent increase," DBS Vickers Securities (Thailand) said in a research note.
"Most of SCC's projects will start commercial operation in the second quarter of 2011. All these three companies will need to submit petitions to the court to lift the suspension orders on their projects, which could take two to three months," it said.
According to the Central Administrative Court's ruling, only two projects were clearly axed. These are the mono ethylene glycol (MEG) expansion project of PTTCH and vinyl chloride monomer (VCM) expansion of Thai Plastic and Chemicals (TPC), which is 45 per cent owned by SCC. For PTTCH, which could continue with its other three projects, this will hurt earnings next year by 2 per cent.
"We believe that it should take at least six to 12 months for terminated projects to apply for an operating licence, and get environmental and health impact assessment (HIA) approval, and conduct a public hearing as required by law," it added.
The securities house favours SCC, which can now proceed with its four downstream expansion projects, given that volume growth should be able to offset the petrochemical cycle's trough and that SCC is less prone to regulatory risk than PTT, which, for example, faces a cap on the price of liquefied petroleum gas.
Tisco Securities expects the share prices of PTT, SCC, TTCL and GLOW to rise to Bt305, Bt331, Bt8.2 and Bt50.25, following the end of complications on industrial investment in Map Ta Phut.
It noted that under the court's ruling, only two projects' licences will be revoked and the protesters' renewed efforts to launch an appeal is predictable.
The court's ruling: All eight government agencies did not violate the law. Only projects which won licences after the Constitution of 2007 was promulgated and fit the NEB's list of harmful activities see their licences revoked. As such, 74 projects can proceed.
"The worst is over," Tisco Securities simply said.
Bualuang Securities said the court ruling was better than expected. While the market anticipated these projects would resume operations next year, some could start by next month. Even TPC and PTTCH's projects, which are terminated, could also resume operations in the first quarter of next year after completing the requirements set by Article 67(2) of the Constitution, as both HIA studies should be completed by the end of this year.
"MEG is not contributing a sizeable amount of output to PTTCH, while TPC could import VCM for its domestic production," it noted. The ruling should benefit PTT Group, given that the supply of petrochemical feedstock would rise when the gas separation plant goes online. This would be in time for the start of the petrochemical upcycle late this quarter or the next quarter.
Kim Eng Securities (Thailand) expects SCC to show a record net profit during 2011-2013, at Bt40 billion-Bt50 billion. It will revisit the boom times because of the cement business, as the cement price is on the rise. With 10 million tonnes for domestic sale, SCC saw the Tiger brand cement price climb Bt100 per tonne in September from August. For every Bt100 increase per tonne, its EBITDA would gain about Bt1 billion. Last year, the cement business' EBITDA stood at Bt11.27 billion.
Kim Eng believes that SCC would benefit the most from its aggregate investment of Bt155 billion from 2011-2013. While its stock closed at Bt313 last week, it could go as high as Bt350.