Three important issues were discussed at the analyst meeting yesterday. 1)
PTT confirmed its plan to sell the entire shares of 27.22% in BCP in order to
reduce its stake in nationwide refinery business, from six to five refineries.
Moreover, since BCP has its own-brand oil and non-oil businesses (e.g. coffee
shops and minimarts), this business restructuring of PTT will increase
competition in the industry and thus result in maximum benefits for
consumers. If PTT can sell BCP as planned, it will be able to book profit from
the share sales (net after tax) at around B4.5bn (average cost of
B14.9/share) or EPS of B1.58/share. 2) Regarding a separation of a gas
pipeline business to be under GPSC’s management as a flagship for PTT’s
basis utility business i.e. power plant and gas transmitting pipeline, PTT said
this issue would not have an impact on shareholders. 3) For the
postponement of the listing of GPSC and SPRC in the SET from 2Q14 to late
2014 or early 2015, PTT said it would not affect the forecast since the issue
had not been included in the first place.
- Normalized profit to stay high in 2Q14, thanks to PTTEP
We project 2Q14 normalized profit to stay high close to the previous quarter
since PTTEP’s sales volume would increase after the acquisition of two
projects from Hess Corporation Thailand on April 22, 2014. The two projects
are 1) Sinphuhorm (Hess holding 35% stake) with 100 million cubic feet a
day capacity of natural gas production and 2) Pailin (Hess holding 15%
stake) with 360 million cubic feet a day capacity of natural gas production,
which would help increase total sales volume of PTTEP by 10,000 barrels a
day. For PTTGC, the profit is projected to rebound again after all plants
resume their full-capacity operation. The refinery business would weaken
because TOP and BCP will have a planned overhaul of their refineries in
2Q14, while PTT’s gas sales volume would decrease from eight-day and 15-
day maintenance shutdowns of the gas separation plant unit 6 (GSP#6) and
the ethane separation plant, respectively.
- Low P/E ratio and laggard price
2014 fair value (DCF) is B360. We reiterate to buy PTT as it still provides
18% upside and 2014 P/E ratio is low at only 8.4x, versus the regional
average of 11.5x. Dividend yield can be expected at 4-5% p.a.