PTT Global Chemical
PTT Global Chemical Outperform (17E TP Bt78.00)
Company Update
Close Bt70.00
Petrochemicals February 16, 2017
Earnings upgrade/ Earnings downgrade / Overview unchanged
Asset injection: strategic fit and value creation Price Performance (%)
Source: SET Smart
FY17
Consensus EPS (Bt)
6.154
6.643
KT ZMICO vs. consensus Share data
8.1%
10.8%
Reuters / Bloomberg
PTTGC.BK/PTTGC TB
Paid‐up Shares (m)
FY18
4,508.85
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
316.00/9,015.00
Foreign limit / actual (%)
37.00/20.84
52 week High / Low (Bt)
70.50/52.00
Avg. daily T/O (shares 000)
11,855.00
NVDR (%)
10.54
Estimated free float (%)
50
Beta
1.34
URL
www.pttgcgroup.com
CGR
Anti‐corruption
Level 4 (Certified)
Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
LT growth platform intact We maintain our Outperform rating on PTTGC, with an upward revision made to its earnings and TP (to Bt78/share) to reflect the recent announcement of an asset injection from PTT. As it is targeted as the group’s petrochemical flagship, this strategic move will help to broaden and diversify PTTGC’s product portfolio to a full value chain including performance chemicals, leading to value enhancement in the long run. Cluster of asset injections from PTT at a justified price PTTGC has entered into a deal for an asset injection from PTT with target companies engaging in the propylene and biochemical value chain, as well as related service business, for the total amount of Bt26.3bn (including rights and obligations under the Shareholder Agreements and Loan Agreements) but not more than Bt26.8bn at the maximum. The purchase price at each target company looks justified at the benchmark of EV/EBITDA below 6x and PBV ranging between 0.8‐ 1.4x (see Figure 2). This transaction has to be approved by a resolution at the shareholders’ meeting (in Apr‐2017) with no less than three‐ quarters of the votes of non‐PTT shareholders. The transaction is targeted to be completed by Oct‐2017 after the key Condition Precedents are passed. Targeted as the group’s petrochemical flagship This strategic move is aimed at strengthening PTTGC’s position as a world‐scale petrochemical player with a full‐range product portfolio covering PE, PP, and biochemical, as well as increasing the opportunities for integration with value‐added downstream products in growing sectors, including automotive, smart electronics, packaging, and construction material. Given this growth platform, PTTGC is well positioned as the group’s petrochemical flagship. Upward revision on earnings and TP We revise up our 2017‐18E earnings forecasts by 4%/14%, to reflect 1) the incorporation of the recurring benefits from Project Max and other initiatives at Bt2.8‐3.0bn a year in the period; 2) the inclusion of a profit contribution of Bt2.3bn a year from the asset injection with the first full‐ year realization expected in 2018E with HMC as the major contributor; and 3) the fine‐tuning of PE spreads in 2017E to U$$650‐680/ton (vs. US$700‐720/ton earlier). We also raised our 2017E TP to Bt78/share (vs. Bt71 earlier), with the asset injection to add Bt6.5 incremental value (see Figure 3); our estimates mainly focus on HMC (continuing solid performance) and PTTAC (improving performance likely in line with the acrylonitrile price moving from the bottom to mid‐price cycle). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 554,695 15,372 3.41 (53.62) 2.37 49.85 2014 20.54 11.69 1.40 3.4% 6.6% 30.0%
2015 403,440 20,502 4.55 33.52 2.80 51.35 2015 15.38 8.85 1.36 4.0% 9.0% 25.1%
2016 349,101 25,602 5.74 26.15 3.16 54.56 2016 12.20 7.67 1.28 4.5% 10.7% 20.7%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2017E 438,235 30,018 6.65 15.94 3.33 58.43 2017E 10.52 6.59 1.20 4.8% 11.8% 17.6%
2018E 469,906 33,214 7.36 10.65 3.68 62.47 2018E 9.51 6.08 1.12 5.3% 12.2% 8.8%
Figure 1: Asset Injection – strategic fit and potential growth
Source: PTTGC
Figure 2: Asset injection at a justified price
Company Capacity/Business Purchase price (Btmn) Transfer of rights/obligations under loan agreement (Btmn) Transaction size (Btmn) Max. transfer of rights/obligations under loan agreement (Btmn) Max. transaction size (Btmn) PTTGC's holding stake (pre‐) PTTGC's holding stake (post‐) Implied acquisition costs by: EV/EBITDA (x) PBV (x)
HMC
PTTAC
PTTMCC
PTTPM
PTTPL
PTTME
PMMA Project
PP: 770kta
ACN: 200kta
PBS: 20kta
Sales &
Logistic
Maintenance &
FS of
MMA: 70kta 996
MMA
160
Marketing 326
Engineering
14,631
914
73
11
17,111
14,631
9,189 10,185
160
326
914
73
11
26,300
9,639*
50
14,631 0.0% 41.44%
10,635 0.0% 50.0%
210 0.0% 50.0%
326 50.0% 100.0%
914 50.0% 100.0%
73 60.0% 100.0%
11
26,800
5.4 1.4
0.8
0.35
1.0
1.1
1.2
Total
9,189
9,689 0.0% 100.0%
Source: PTTGC, KTZmico Research Note: *depending to the actual accrued interest under PTTAC Loan agreement from Jan‐2017 to the closing date of the transaction, and any drawdown under PTTMCC Loan Agreement prior to the share transfer date
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: Estimated valuation of target companies under asset injection deal Valuation HMC : Core business ‐ PP value chain Assumed annual EBITDA Equity value ‐ on 41.4% stake HMC's other holding interests ROC ‐ at 14.27% stake PTTGC ‐ at 1.85% stake
(DCF, WACC 10%, LTG 0%)
6,500 19,180
Btmn/yr; on 100% basis Btmn
3,425 5,422
Btmn Btmn
HMC ‐ SOTP‐based valuation
EV/EBITDA, pegged at 6x Estimated value, based on average past 2‐month market price
28,026
Btmn
PTTAC : Core business – ACN & MMA Assumed annual EBITDA, based on 20% EBITDA margin PTTAC ‐ Equity value ‐ on 50% stake
(DCF, WACC 10%, LTG 0%)
2,600 1,328
Btmn/yr; on 100% basis Btmn
Total estimates value ‐ HMC & PTTAC
29,354
Btmn
per PTTGC shares
6.5
Bt/share
Source: KT ZMICO Research
Figure 4: Projected benefits from Project Max Source: PTTGC
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 5: PTTGC’s PBV band
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Minority interests Total liab. & shareholder equity CASH FLOW (Btm) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 552,881 (500,673) 52,208 (12,966) 55,979 16,737 39,242 (6,084) 3,757 36,915 (1,976) (1,322) (833) (77) 433 33,140 7.35 7.35 35,294 7.83 3.40
2014 554,695 (526,068) 28,627 (11,802) 32,767 15,942 16,825 (5,448) 5,240 16,617 (581) 117 (2,239) 177 1,280 15,372 3.41 3.41 16,396 3.64 2.37
2015 403,440 (366,168) 37,272 (11,424) 42,234 16,385 25,849 (5,178) 6,203 26,873 (1,984) (2,289) (2,531) 711 (278) 20,502 4.55 4.55 25,322 5.62 2.80
2016 349,101 (307,064) 42,038 (11,590) 47,752 17,304 30,448 (4,220) 1,286 27,513 (3,025) 275 499 617 (278) 25,602 5.74 5.74 24,827 5.51 3.16
2017E 438,235 (392,321) 45,913 (11,063) 53,430 18,579 34,851 (3,228) 1,945 33,568 (4,460) 0 0 1,210 (300) 30,018 6.65 6.65 30,018 6.66 3.33
2018E 469,906 (422,452) 47,454 (11,350) 55,151 19,047 36,103 (2,772) 1,945 35,276 (5,291) 0 0 3,530 (300) 33,214 7.36 7.36 33,214 7.37 3.68
2013 44,384 61,779 50,240 230,934 45,373 432,710 24,438 95,785 187,353 45,088 238,503 6,855 432,710
2014 45,788 43,441 31,577 219,346 41,292 381,443 23,467 89,675 152,993 45,088 224,763 3,687 381,443
2015 47,741 38,274 29,930 220,213 41,387 377,545 9,871 95,976 143,280 45,088 231,552 2,713 377,545
2016 45,312 44,534 35,754 221,514 46,053 393,166 11,200 84,943 144,497 45,088 246,016 2,653 393,166
2017E 34,258 54,029 45,144 193,185 73,427 400,042 13,377 57,417 133,638 45,088 263,452 2,953 400,042
2018E 37,683 57,934 48,611 181,862 76,880 402,970 5,577 51,841 118,060 45,088 281,657 3,253 402,970
2013 33,140 1,322 16,737 (10,114) 41,085 (14,445)
2014 15,372 (117) 15,942 11,198 42,394 (14,760)
2015 20,502 2,289 16,385 5,450 44,626 (17,632)
2016 25,602 (275) 17,304 (1,663) 40,968 (23,735)
2017E 30,018 0 18,579 (14,982) 33,615 (17,237)
2018E 33,214 0 19,047 (7,881) 44,381 (10,701)
(14,445) (16,634) (1,377) (15,337) (8,970) (42,317) (15,678) 26,640 5.91
(14,760) (7,080) (12,317) (15,337) 8,504 (26,230) 1,404 27,634 6.13
(17,632) (7,296) (2,591) (10,691) (4,463) (25,040) 1,953 26,993 5.98
(23,735) (9,704) 1,831 (12,630) 841 (19,662) (2,429) 17,233 3.82
(17,237) (25,349) 2,568 (14,241) (256) (37,277) (20,900) 16,377 3.63
(10,701) (13,377) 3,230 (15,009) (265) (25,421) 8,259 33,680 7.47
2013 (2.3) 3.8 (2.5) 9.4 10.1 7.1 6.0 6.4 5.4
2014 0.3 (41.5) (53.6) 5.2 5.9 3.0 2.8 3.0 3.5
2015 (27.3) 28.9 33.5 9.2 10.5 6.4 5.1 6.3 7.4
2016 (13.5) 13.1 26.2 12.0 13.7 8.7 7.3 7.1 11.0
2017E 25.5 11.9 15.9 10.5 12.2 8.0 6.8 6.8 13.3
2018E 7.2 3.2 10.6 10.1 11.7 7.7 7.1 7.1 15.0
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt70.00
Petrochemicals February 16, 2017
Earnings upgrade/ Earnings downgrade / Overview unchanged
Asset injection: strategic fit and value creation Price Performance (%)
Source: SET Smart
FY17
Consensus EPS (Bt)
6.154
6.643
KT ZMICO vs. consensus Share data
8.1%
10.8%
Reuters / Bloomberg
PTTGC.BK/PTTGC TB
Paid‐up Shares (m)
FY18
4,508.85
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
316.00/9,015.00
Foreign limit / actual (%)
37.00/20.84
52 week High / Low (Bt)
70.50/52.00
Avg. daily T/O (shares 000)
11,855.00
NVDR (%)
10.54
Estimated free float (%)
50
Beta
1.34
URL
www.pttgcgroup.com
CGR
Anti‐corruption
Level 4 (Certified)
Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
LT growth platform intact We maintain our Outperform rating on PTTGC, with an upward revision made to its earnings and TP (to Bt78/share) to reflect the recent announcement of an asset injection from PTT. As it is targeted as the group’s petrochemical flagship, this strategic move will help to broaden and diversify PTTGC’s product portfolio to a full value chain including performance chemicals, leading to value enhancement in the long run. Cluster of asset injections from PTT at a justified price PTTGC has entered into a deal for an asset injection from PTT with target companies engaging in the propylene and biochemical value chain, as well as related service business, for the total amount of Bt26.3bn (including rights and obligations under the Shareholder Agreements and Loan Agreements) but not more than Bt26.8bn at the maximum. The purchase price at each target company looks justified at the benchmark of EV/EBITDA below 6x and PBV ranging between 0.8‐ 1.4x (see Figure 2). This transaction has to be approved by a resolution at the shareholders’ meeting (in Apr‐2017) with no less than three‐ quarters of the votes of non‐PTT shareholders. The transaction is targeted to be completed by Oct‐2017 after the key Condition Precedents are passed. Targeted as the group’s petrochemical flagship This strategic move is aimed at strengthening PTTGC’s position as a world‐scale petrochemical player with a full‐range product portfolio covering PE, PP, and biochemical, as well as increasing the opportunities for integration with value‐added downstream products in growing sectors, including automotive, smart electronics, packaging, and construction material. Given this growth platform, PTTGC is well positioned as the group’s petrochemical flagship. Upward revision on earnings and TP We revise up our 2017‐18E earnings forecasts by 4%/14%, to reflect 1) the incorporation of the recurring benefits from Project Max and other initiatives at Bt2.8‐3.0bn a year in the period; 2) the inclusion of a profit contribution of Bt2.3bn a year from the asset injection with the first full‐ year realization expected in 2018E with HMC as the major contributor; and 3) the fine‐tuning of PE spreads in 2017E to U$$650‐680/ton (vs. US$700‐720/ton earlier). We also raised our 2017E TP to Bt78/share (vs. Bt71 earlier), with the asset injection to add Bt6.5 incremental value (see Figure 3); our estimates mainly focus on HMC (continuing solid performance) and PTTAC (improving performance likely in line with the acrylonitrile price moving from the bottom to mid‐price cycle). Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 554,695 15,372 3.41 (53.62) 2.37 49.85 2014 20.54 11.69 1.40 3.4% 6.6% 30.0%
2015 403,440 20,502 4.55 33.52 2.80 51.35 2015 15.38 8.85 1.36 4.0% 9.0% 25.1%
2016 349,101 25,602 5.74 26.15 3.16 54.56 2016 12.20 7.67 1.28 4.5% 10.7% 20.7%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2017E 438,235 30,018 6.65 15.94 3.33 58.43 2017E 10.52 6.59 1.20 4.8% 11.8% 17.6%
2018E 469,906 33,214 7.36 10.65 3.68 62.47 2018E 9.51 6.08 1.12 5.3% 12.2% 8.8%
Figure 1: Asset Injection – strategic fit and potential growth
Source: PTTGC
Figure 2: Asset injection at a justified price
Company Capacity/Business Purchase price (Btmn) Transfer of rights/obligations under loan agreement (Btmn) Transaction size (Btmn) Max. transfer of rights/obligations under loan agreement (Btmn) Max. transaction size (Btmn) PTTGC's holding stake (pre‐) PTTGC's holding stake (post‐) Implied acquisition costs by: EV/EBITDA (x) PBV (x)
HMC
PTTAC
PTTMCC
PTTPM
PTTPL
PTTME
PMMA Project
PP: 770kta
ACN: 200kta
PBS: 20kta
Sales &
Logistic
Maintenance &
FS of
MMA: 70kta 996
MMA
160
Marketing 326
Engineering
14,631
914
73
11
17,111
14,631
9,189 10,185
160
326
914
73
11
26,300
9,639*
50
14,631 0.0% 41.44%
10,635 0.0% 50.0%
210 0.0% 50.0%
326 50.0% 100.0%
914 50.0% 100.0%
73 60.0% 100.0%
11
26,800
5.4 1.4
0.8
0.35
1.0
1.1
1.2
Total
9,189
9,689 0.0% 100.0%
Source: PTTGC, KTZmico Research Note: *depending to the actual accrued interest under PTTAC Loan agreement from Jan‐2017 to the closing date of the transaction, and any drawdown under PTTMCC Loan Agreement prior to the share transfer date
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: Estimated valuation of target companies under asset injection deal Valuation HMC : Core business ‐ PP value chain Assumed annual EBITDA Equity value ‐ on 41.4% stake HMC's other holding interests ROC ‐ at 14.27% stake PTTGC ‐ at 1.85% stake
(DCF, WACC 10%, LTG 0%)
6,500 19,180
Btmn/yr; on 100% basis Btmn
3,425 5,422
Btmn Btmn
HMC ‐ SOTP‐based valuation
EV/EBITDA, pegged at 6x Estimated value, based on average past 2‐month market price
28,026
Btmn
PTTAC : Core business – ACN & MMA Assumed annual EBITDA, based on 20% EBITDA margin PTTAC ‐ Equity value ‐ on 50% stake
(DCF, WACC 10%, LTG 0%)
2,600 1,328
Btmn/yr; on 100% basis Btmn
Total estimates value ‐ HMC & PTTAC
29,354
Btmn
per PTTGC shares
6.5
Bt/share
Source: KT ZMICO Research
Figure 4: Projected benefits from Project Max Source: PTTGC
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 5: PTTGC’s PBV band
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Financial tables PROFIT & LOSS (Btm) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Minority interests Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btm) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Minority interests Total liab. & shareholder equity CASH FLOW (Btm) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 552,881 (500,673) 52,208 (12,966) 55,979 16,737 39,242 (6,084) 3,757 36,915 (1,976) (1,322) (833) (77) 433 33,140 7.35 7.35 35,294 7.83 3.40
2014 554,695 (526,068) 28,627 (11,802) 32,767 15,942 16,825 (5,448) 5,240 16,617 (581) 117 (2,239) 177 1,280 15,372 3.41 3.41 16,396 3.64 2.37
2015 403,440 (366,168) 37,272 (11,424) 42,234 16,385 25,849 (5,178) 6,203 26,873 (1,984) (2,289) (2,531) 711 (278) 20,502 4.55 4.55 25,322 5.62 2.80
2016 349,101 (307,064) 42,038 (11,590) 47,752 17,304 30,448 (4,220) 1,286 27,513 (3,025) 275 499 617 (278) 25,602 5.74 5.74 24,827 5.51 3.16
2017E 438,235 (392,321) 45,913 (11,063) 53,430 18,579 34,851 (3,228) 1,945 33,568 (4,460) 0 0 1,210 (300) 30,018 6.65 6.65 30,018 6.66 3.33
2018E 469,906 (422,452) 47,454 (11,350) 55,151 19,047 36,103 (2,772) 1,945 35,276 (5,291) 0 0 3,530 (300) 33,214 7.36 7.36 33,214 7.37 3.68
2013 44,384 61,779 50,240 230,934 45,373 432,710 24,438 95,785 187,353 45,088 238,503 6,855 432,710
2014 45,788 43,441 31,577 219,346 41,292 381,443 23,467 89,675 152,993 45,088 224,763 3,687 381,443
2015 47,741 38,274 29,930 220,213 41,387 377,545 9,871 95,976 143,280 45,088 231,552 2,713 377,545
2016 45,312 44,534 35,754 221,514 46,053 393,166 11,200 84,943 144,497 45,088 246,016 2,653 393,166
2017E 34,258 54,029 45,144 193,185 73,427 400,042 13,377 57,417 133,638 45,088 263,452 2,953 400,042
2018E 37,683 57,934 48,611 181,862 76,880 402,970 5,577 51,841 118,060 45,088 281,657 3,253 402,970
2013 33,140 1,322 16,737 (10,114) 41,085 (14,445)
2014 15,372 (117) 15,942 11,198 42,394 (14,760)
2015 20,502 2,289 16,385 5,450 44,626 (17,632)
2016 25,602 (275) 17,304 (1,663) 40,968 (23,735)
2017E 30,018 0 18,579 (14,982) 33,615 (17,237)
2018E 33,214 0 19,047 (7,881) 44,381 (10,701)
(14,445) (16,634) (1,377) (15,337) (8,970) (42,317) (15,678) 26,640 5.91
(14,760) (7,080) (12,317) (15,337) 8,504 (26,230) 1,404 27,634 6.13
(17,632) (7,296) (2,591) (10,691) (4,463) (25,040) 1,953 26,993 5.98
(23,735) (9,704) 1,831 (12,630) 841 (19,662) (2,429) 17,233 3.82
(17,237) (25,349) 2,568 (14,241) (256) (37,277) (20,900) 16,377 3.63
(10,701) (13,377) 3,230 (15,009) (265) (25,421) 8,259 33,680 7.47
2013 (2.3) 3.8 (2.5) 9.4 10.1 7.1 6.0 6.4 5.4
2014 0.3 (41.5) (53.6) 5.2 5.9 3.0 2.8 3.0 3.5
2015 (27.3) 28.9 33.5 9.2 10.5 6.4 5.1 6.3 7.4
2016 (13.5) 13.1 26.2 12.0 13.7 8.7 7.3 7.1 11.0
2017E 25.5 11.9 15.9 10.5 12.2 8.0 6.8 6.8 13.3
2018E 7.2 3.2 10.6 10.1 11.7 7.7 7.1 7.1 15.0
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Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, M‐CHAI, TFD. KT ZMICO is a co underwriter of RPH.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89) Good (scores: 70 – 79)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59) No Logo N/A (scores: below 50)
Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
