1. Art and Diseño

Wednesday, January 28, 2015
Company Update
PTT Global Chemical
MEG, BPA spreads make new high
Spreads of MEG and BPA made a new high in two years, increasing a chance
for PTTGC to show high profit growth in 1Q15. With low P/E ratio of only 7.9x
and dividend yield of 6% p.a., this is a good entry point.
PTTGC
Rec. : BUY
Logo
MEG, BPA spreads make new high in two years
In January 2015, spreads of finished oil, olefins petrochemical products, and
aromatics petrochemical products have remained high near those of 4Q14’s.
Outstandingly, spreads of MEG and BPA, with production capacity of
390,000 and 150,000 tons a year, respectively, have widened 47.5% and
25.0% from the average spreads in 4Q14 and made a two-year high. A
spread of olefins plastic resin has stayed high around US$680-700/ton,
while a spread of aromatics paraxylene has reverted to stand above
US$400/ton again. All these are positive factors for PTTGC.
Profit growth expected in 1Q15
Current Price (B): 56.00
Target Price (B): 68.00
Upside : 21.4%
Dividend Yield : 6.3%
Total Return : 27.7%
Market Cap. (Bm) : 252.495.55
CG Score:
Technical Chart
We maintain our FY2015 forecast, projecting to see a profit rebound in
1Q15 as a result of high GRM from a winter season in many areas
worldwide and lower stock loss because the decreasing oil price would
possibly have more limited downside now. For the petrochemical business,
olefins spread in January has weakened from 4Q14 but is still high, while
aromatics spread is projected to stabilize after new supply in 2015 has
started to decline. Overall, we estimate FY2015 profit growth at 49.1%qoq.
Very good entry point
Fair value at end-2015 is B68. We reiterate to buy PTTGC, believing that the
earlier decline of the share price has overly absorbed negative factors until
it is undervalued. The current P/E ratio is low at only 7.9x, versus the
regional average of 13.5x. Dividend yield can be expected at 6%p.a.
Moreover, the share price is most laggard among refinery and petrochemical
plays.
Key Data
FY: Dec 31
Sales (Bm)
Net Profit (Bm)
EPS (B)
BVS (B)
PER (x)
PBV (x)
EV/EBITDA (x)
DPS (B)
Dividend Yield (%)
ROAE (%)
FY12A
562,811
34,001
7.54
52.79
7.92
1.13
35,865
3.40
5.7%
15.23
FY13A
549,189
33,277
7.38
54.39
8.10
1.10
34,818
3.40
5.7%
13.77
FY14F
597,024
27,858
6.18
60.21
9.67
0.99
29,193
2.85
4.8%
10.78
FY15F
606,022
32,050
7.11
64.13
8.41
0.93
34,309
3.50
5.9%
12.81
FY16F
615,555
34,037
7.55
68.13
7.91
0.88
37,757
4.00
6.7%
13.81
ASP vs IAA concensus
EPS (B)
ASP
Cons
%diff
2014F
7.11
7.06
1%
2015F
7.55
7.31
3%
Source: IAA concensus and ASP
Nalinrat Kittikumpolrat
License No.: 018350
[email protected]
Source : ASP Research
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
MEG, BPA spreads make new high in two years
In January 2015, spreads of finished oil, olefins petrochemical products, and
aromatics petrochemical products have remained high near those of 4Q14’s.
Outstandingly, spreads of MEG (MEG-0.65Ethylene) and BPA (BPA-Phenol),
with production capacity of 390,000 and 150,000 tons a year, respectively,
have widened 47.5% and 25.0% from the average spreads in 4Q14 and
made a two-year high on January 27, 2015, mainly because the production
cost has decreased at a faster rate than the product prices owing to high
demand (as most companies had no products stock in December, they have
to buy in the spot market in January). MEG and BPA spreads in 2015 are
projected to improve from 2014 since production cost would drop owing to
new ethylene (for MEG) and phenol (for BPA) supply.
Olefins spreads have widened above the average in the recent week. Since
raw material (Naphtha) cost has slipped 2.5%wow to US$422/ton while
product prices have stayed flat, spreads of HDPE-Naphtha and LDPENaphtha have risen by 1.6%wow on average to US$683/ton and
US$678/ton, respectively. Similarly, aromatics spreads have increased from
the previous week as well. Spread of Px-Condensate has widened by
2.8%wow to US$401/ton, and Bz-Condensate spread has risen by
11.9%wow to US$253/ton.
Profit growth expected in 1Q15
We maintain our FY2015 forecast. After 4Q14 profit is estimated at B1.5bn,
plunging significantly from 3Q14 as a result of over US$30/barrel stock loss,
a profit rebound is projected in 1Q15 since GRM is expected to stay high like
in 4Q14 thanks to a winter season in many areas worldwide and lower stock
loss because the decreasing oil price would possibly have more limited
downside now. PTTGC's earnings are expected to grow continuously
throughout 2015; stock gain/loss is not included in our forecast yet.
For the petrochemical business, although olefins spread in January has
weakened from 4Q14, it is still high, likely to remain high for the remainder
of 2015 thanks to lower supply (production has been delayed in the US and
halted in Europe). Meanwhile, new aromatics supply has dropped from 5.2
million tons in 2014 to 3.9 million tons in 2015, so average aromatics
spread is projected to stabilize from 2014. Overall, we estimate FY2015
profit growth at 49.1%qoq.
Spread of Petroleum and Aromatic Products
Dubai
($/BBL)
Year
GO 0.05Dubai
Jet-Dubai
Fuel OilDubai
GasolineDubai
Condensate
Erawan
PX
Contract
FECP*
PX TW
Spot (CFR)
BZ Spot
Korea
Phenol
(CMP)
BPA (CMP)
PX FECPCond
PX-Cond
Spot
Taiwan
BZ-Cond
Spot KR
Phenol
(CMP)-BZ
BPA
(CMP)Phenol
2012
109.08
17.76
19.06
-3.35
14.37
946
1,484
1,521
1,207
1,445
1,678
539
575
261
239
233
1Q-13
108.19
20.26
19.61
-7.37
18.39
948
1,618
1,635
1,379
1,523
1,880
669
687
430
145
356
2Q-13
100.78
15.33
16.81
-3.67
14.62
871
1,409
1,443
1,286
1,402
1,719
539
572
415
116
317
3Q-13
106.30
16.96
17.32
-10.71
12.41
930
1,440
1,485
1,258
1,352
1,630
510
556
328
95
277
4Q-13
106.82
17.32
17.71
-10.47
9.20
937
1,440
1,432
1,283
1,387
1,605
502
494
346
104
218
2013
105.52
17.47
17.86
-8.06
13.66
922
1,479
1,499
1,301
1,416
1,708
557
577
380
115
292
1Q-14
104.46
17.01
17.80
-8.51
14.56
917
1,303
1,284
1,297
1,424
1,638
386
367
380
126
214
2Q-14
106.13
14.29
16.04
-10.65
16.06
922
1,256
1,259
1,293
1,456
1,653
334
337
370
164
197
3Q-14
101.45
14.50
14.43
-8.44
13.18
872
1,350
1,346
1,301
1,592
1,894
479
474
430
291
302
339
Oct
86.63
14.93
13.60
-7.55
14.54
720
1,210
1,102
1,130
1,491
1,830
490
381
410
361
Nov
76.33
20.08
17.52
-4.61
14.11
659
1,017
1,018
997
1,286
1,651
358
358
338
289
365
Dec
60.25
18.11
16.86
-4.70
11.67
525
879
877
733
929
1,305
353
352
208
196
376
4Q-14
74.40
17.71
15.99
-5.62
13.44
635
1,035
999
954
1,235
1,595
400
364
319
282
360
2014
96.61
15.88
16.06
-8.30
14.31
836
1,236
1,222
1,211
1,427
1,695
400
385
375
216
268
Jan
45.80
17.94
17.31
-1.88
11.62
408
780
780
605
865
1,259
373
373
198
260
394
Last week avg.
Today
44.43
44.01
18.17
18.29
16.89
16.73
-0.58
0.62
12.36
12.03
397
392
787
793
787
793
623
645
855
855
1,305
1,305
390
401
390
401
226
253
232
211
450
450
Source : ASP Research
Spread of Olefin Product
Naphtha
MOPJ
Year
ETHYLENE
S.E.ASIA
PROPYLENE HDPE (FILM) LLDPE (SEA)
S.E.ASIA
SEA
CFR SEA
LDPE CFR
SE AISA
MEG ACP
MEG ASP
Butadiene
SEA
HDPE-MOPJ LLDPE-MOPJ LDPE-MOPJ
MEG ACP0.65Ethy
2012
943
1,230
1,267
1,380
1,354
1,362
1,179
2,045
436
411
419
379
1Q-13
961
1,395
1,306
1,482
1,477
1,459
1,282
1,134
1,731
521
515
498
375
2Q-13
858
1,265
1,297
1,443
1,433
1,444
1,173
979
1,344
585
575
586
351
3Q-13
920
1,322
1,336
1,489
1,490
1,569
1,143
1,065
1,129
568
569
649
284
4Q-13
946
1,427
1,366
1,536
1,549
1,664
1,208
1,045
1,524
590
603
718
281
2013
921
1,352
1,326
1,488
1,487
1,534
1,202
1,123
1,432
566
566
613
323
1Q-14
935
1,441
1,369
1,554
1,560
1,639
1,182
963
1,348
620
625
705
245
2Q-14
951
1,447
1,279
1,569
1,578
1,605
1,093
941
1,289
618
627
653
152
3Q-14
913
1,478
1,301
1,604
1,601
1,601
1,143
972
1,448
691
688
688
182
Oct
743
1,376
1,216
1,564
1,562
1,566
1,115
839
1,160
821
819
823
221
Nov
669
1,235
1,119
1,498
1,489
1,499
980
951
989
828
820
830
177
Dec
528
1,031
761
1,284
1,243
1,255
1,010
792
924
756
715
727
340
4Q-14
647
1,214
1,032
1,448
1,431
1,440
1,035
827
1,024
802
785
793
246
2014
861
1,395
1,245
1,544
1,543
1,571
1,113
926
1,277
682
681
710
206
Jan
424
923
708
1,138
1,127
1,137
945
715
675
714
702
712
345
Last week avg.
433
895
740
1,105
1,105
1,100
945
728
625
672
672
667
363
Today
422
895
740
1,105
1,105
1,100
945
728
625
683
683
678
363
Source: PTTGC
Regional Petrochemical Recommendations
Target Price
Upside
(%)
3.36
3.27
8.7
6.2
9.2
6.5
6.0%
4.9%
1.1
0.9
1.0
0.9
10.9
9.7
16.3
13.9
4.09
3.74
3.04
65.6
76.5
70.0
73.2
79.1
70.8
11.6%
3.4%
1.1%
1.7
1.7
1.4
1.6
1.7
1.4
17.2
20.1
21.3
15.8
18.0
18.4
3.83
3.73
3.13
445.1
640.0
346.0
511.0
613.8
334.2
14.8%
-4.1%
-3.4%
0.5
1.4
0.9
0.5
1.3
0.9
76.3
6.5
20.5
7.5
11.2
14.4
4.45
2.82
5.9
2.2
8.1
2.4
38.5%
7.4%
1.3
1.1
1.1
1.0
19.4
58.2
14.5
13.9
4.45
4.17
3.81
889.1
692.1
331.1
1072.9
799.6
405.5
20.7%
15.5%
22.5%
1.3
2.3
1.1
1.2
2.1
1.0
11.9
15.2
12.5
10.9
12.5
9.3
6%
2.75
1.29
5.6
17.6
5.6
16.0
0.1%
-9.4%
1.9
3.3
1.8
3.2
15.6
26.8
15.1
21.9
4%
BUY
BUY
HOLD
BUY
BUY
BUY
HOLD
HOLD
350.00
56.00
48.50
3.50
33.25
20.60
10.30
28.25
394.00
68.00
48.00
3.60
33.50
33.00
n.a.
n.a.
12.6%
21.4%
-1.0%
2.9%
0.8%
60.2%
n.a.
n.a.
1.3
0.9
1.0
0.9
1.3
1.4
NM
NM
1.3
1.2
0.8
0.9
0.9
1.2
1.2
NM
NM
1.2
9.9
7.9
14.1
24.4
9.7
26.0
NM
NM
14.0
9.3
7.4
9.4
12.1
8.0
19.0
NM
NM
13.3
2%
18%
16%
15%
15%
12%
9%
10%
8%
8%
6%
6%
5%
5%
5%
2%
1%
Source :ASP Research
TP C
IV L
VNT
B CP
S E T E N E RG
SET
PTT
P TTGC
IR P C
ESSO
0%
Calculation excluded companies with unusual PER or PBV
BB Rating is the average from Recommendation Consensus of analysts- in the last 12 months etc.
5 = BUY, 4 + WEAK BUY, 3 = HOLD, 2 = WEAK SELL, 1 = SELL
Source : Bloomberg
14%
14%
S E TP E TRO
Remark: -
Year to Date return
PER
2014F
2015F
Current
Price
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