Price (Bt) 209
Target (Bt) 227
Set Index 533.92
Weak 1Q09 earnings of Bt7,449mn and a downgrade to buy on weakness
1Q09 net profit of Bt7,449mn, down 71% yoy
The company announced a disappointing 1Q09 net profit of Bt7,449mn or an EPS of Bt2.64, down 71%
yoy compared to a net profit of Bt26,133mn or an EPS of Bt9.27 in the same period of last year and 27%
below our expectation. The key pressure on earnings was from lower average sales prices in line with lower
crude oil prices. The gas business earnings declined from a loss of about -Bt1.6bn on the sale of gas for
NGV at Bt8.5/kg from a cost of Bt14/kg, while PTTEP earnings also decreased 35% yoy. In addition, the sharp
reduction in refinery earnings was another negative factor for PTT as well as petrochemicals with a loss
this quarter (mostly forex loss).
Earnings from refinery and petrochems will support 2Q09 earnings
We believe earnings will improve in all business lines in the second quarter. Operational profits
from gas should be good from a 10% increase in the gas line tariff (from Bt19.7447/mn Btu to Bt21.7665/mn
Btu) and the recovery in gas operations following a recovery in petrochemical prices. The refinery is
expected to improve from a better gross refining margin (GRM) and aromatics prices with an earnings upside
from oil inventory, which should gain based on higher crude oil. Petrochemicals will also tend to return to
profit in 2Q09 because of the wider spread from the increase in petrochemical prices. However, this profit
will not quite reach the 2Q08 level of Bt29,365mn. With these disappointing 1Q09 earnings, we are
downgrading our 2009 earnings projection by 23% to Bt48,517mn (EPS Bt17.18), a decrease of 6% yoy.
Earnings deeply below expectation, downgrade recommendation
With our PTT earnings revision and our adjusted prices for TOP, PTTAR and IRPC (Bt40.75, Bt18.60
and Bt2.82, respectively), we are using a sum-of-the-parts method to calculate a new fair value of Bt227
(down from Bt232). The current share price trades on a PER of 12.2x with a dividend yield of 2.9% and still
offers a 9% upside to our new adjusted price. With these weaker 1Q09 earnings, which are deeply below
consensus forecasts, and with a limited upside gain to our new fair value estimate, we are maintaining our
Buy on weakness rating for PTT.
Earnings summary
Year End Dec 31 2007 2008 2009F 2010F 2011F
Sales (Btmn) 1,508,129 2,000,816 1,527,970 1,574,393 1,621,750
EBITDA (Btmn) 149,789 160,815 112,864 140,031 159,685
Normalised earnings (Btmn) 83,983 53,688 48,517 65,217 77,135
Earnings (Btmn) 97,804 51,705 48,517 65,217 77,135
EPS (Bt) 34.82 18.33 17.18 23.09 27.31
PER (x) 6 11.4 12.2 9.1 7.7
EV/EBITDA (x) 4.9 4.6 6.5 5.4 4.5
Free cash flow (Btmn) 29,161 18,776 -5,904 -36,771 14,826
CF/share (Bt) 43.2 44.7 23.9 17.2 26.2
BVPS (Bt) 128.7 136 147 162.2 180.1
P/BV (x) 1.6 1.5 1.4 1.3 1.2
DPS (Bt) 11.5 8 6 8 9.5
Dividend yield (%) 5.50% 3.80% 2.90% 3.80% 4.50%
Net debt/equity (x) 0.4 0.4 0.4 0.4 0.3
ROA (%) 11.90% 5.80% 5.40% 7.10% 7.90%
ROE (%) 30.00% 13.90% 12.10% 14.90% 16.00%
Source : Company reports and KELIVE Research estimates.
By Kim Eng Securities (Thailand) Company Limited on May 18, 2009
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