20151119-Maybank_KERPL-PTT_Public_Valuable_Blue-chip_12页_777kb

PTT Public (PTT TB) Summary

Core Content

• Share Price: THB263.00
• Target Price: THB328.00 (+25%)
• Market Cap (USD): 20.9B
• Average Daily Trading Volume (USD): 60M
• Sector: Oil & Gas
• Country: Thailand
• Recommendation: BUY (unchanged)

Main Points

• Resilience to Low Oil Prices: PTT is expected to maintain profitability despite low oil prices due to its business integration and stable gas prices. Management anticipates a Dubai crude price of USD53-56/bbl for 2016, which aligns with the assumption of USD52.
• Capex Cuts and Asset Divestment: PTT plans to cut capital expenditure, delay certain investments, and divest unprofitable assets to improve financial strength.
• Downstream Strength: Refinery capacity additions are expected to remain low in 2016 (1mbbl), below 2015’s 2mbbl, which supports continued strong performance. Polypropylene margins are expected to remain firm, while polyethylene margins may soften.
• Gas Margin Recovery: PTT's gas margins are on track for recovery due to lower input costs and higher NGV selling prices. The company plans to increase NGV prices to THB14.50/kg in 2016, which could improve profits.
• Foreign Ownership: Foreign ownership in PTT is at a low of 20.6% (including NVDR), down from 22.9% in 2014, presenting a buying opportunity.
• Valuation Metrics:
  • Core P/E (x): 8.5 (FY16)
  • P/BV (x): 1.0 (FY16)
  • EV/EBITDA (x): 3.8 (FY16)
  • Net Dividend Yield (%): 4.9 (FY16)
  • ROAE (%): 12.1 (FY16)
  • ROAA (%): 4.0 (FY16)
• SOTP Valuation: The target price of THB328 is based on SOTP analysis, implying a 10.6x FY16 P/E, which is below the 5-year average.

Key Information

• Recurring Profit Growth: The report expects a 9% growth in recurring profit for FY16, driven by downstream demand and supply dynamics.
• EPS Growth: Core EPS is expected to grow by 103.0% in FY16.
• Dividend Stability: Net DPS is expected to remain stable, with a 4.9% yield in FY16.
• Financial Health: PTT’s net gearing is below 0.4x, and the company is expected to remain financially strong for the next decade.
• Downstream Contributions: PTT’s downstream subsidiaries are expected to continue contributing significantly, with stable operating rates for polypropylene and lower for polyethylene.
• Catalysts for Buy Recommendation: The recovery of gas margins, stable refinery demand, and potential for share price recovery are key catalysts for the BUY recommendation.

Financial Highlights

Key Data

• 52-Week High/Low (THB): 397.00 / 240.00
• 3-Month Avg Turnover (USDm): 59.6
• Free Float (%): 48.9
• Issued Shares (m): 2,856
• Market Capitalization (THB): 751.2B
• Major Shareholders:
  • Ministry of Finance: 51.1%
  • Vayupak Fund: 14.9%
  • Thai NVDR: 5.1%

Summary of Key Figures

• Gas Feed Costs: Down 7% while Dubai crude dropped 48%.
• NGV Prices: Expected to rise to THB14.50/kg in 2016, improving profit margins.
• Profit Margins: PTT's EBITDA margin is expected to increase to 15.5% in FY16.
• Free Cash Flow Yield (%): 25.1% (FY16), indicating strong cash generation.
• Dividend Cover (x): 2.4 (FY16), suggesting strong dividend sustainability.
• Current Ratio (x): 2.5 (FY16), indicating strong short-term liquidity.

Conclusion

PTT is expected to maintain profitability despite low oil prices due to its resilient downstream operations and gas margin recovery. The company's financial health and strategic initiatives support a BUY recommendation, with the target price of THB328 reflecting its strong fundamentals and potential for recovery.