Thai Oil - Global Alliance Partners
-edits
Thai Oil Underperform (16E TP Bt57.00)
Company Update
Close Bt55.75
Energy & Utilities October 26, 2015
Earnings upgrade / Earnings downgrade / Overview unchanged
Reverse to net loss in 3Q15E due to stock loss and FX loss Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
5.984
5.860
KT ZMICO vs. consensus Share data
‐8.9%
2.9%
Reuters / Bloomberg
TOP.BK/TOP TB
Paid‐up Shares (m)
2,040.03
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
114.00/3,198.00
Foreign limit / actual (%)
40.00/23.63
52 week High / Low (Bt)
60.00/41.00
Avg. daily T/O (shares 000)
5,734.00
NVDR (%)
7.43
Estimated free float (%)
50.04
Beta
1.32
URL
www.thaioilgroup.com
CGR
Anti‐corruption
Level 4 (Certified)
Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
Supply risk leading to lack of earnings catalysts While the company’s 2015E earnings will be healthier than the low‐base 2014 earnings despite the weak 3Q15 earnings, we don’t see any positive catalysts to drive its 2016E core profit amidst larger net refining additions and the continuing oversupply situation in the aromatics market. Meanwhile, growth story projects (including the 200kbd CDU#4 and unit upgrading from fuel oil to diesel) are under study and likely to take a long time to bear fruit; thus, we maintain Underperform on TOP. Expect a net loss of Bt2.2bn in 3Q15E We expect TOP to mark a Bt2.2bn net loss in 3Q15E, close to 3Q14 but reversing from the upbeat profit in 2Q15, largely blamed on stock loss (US$4.7/bbl, approximately Bt4.4bn) and forex loss (Bt2.6bn). Stripping out the forex loss, it’s likely to deliver a slim Bt410mn core profit (including stock loss impact as the recurring item), thanks to hedging gain (~Bt560mn) and the non‐core contribution (totalling Bt676mn from other income and the profit contribution from affiliates) being the cushion despite the drop in accounting GIM, particularly QoQ, to US$3.2/bbl (see details on page 2). Earnings forecasts maintained Given that the 9M15E core profit and NP represent 86% and 77% of our full‐ year forecasts of Bt13.5bn and Bt11.1bn, respectively, our 2015E forecasts are likely to be achievable given the possible reversal to stock gain in 4Q15E should the crude oil price bounce back by the winter season and a lesser forex impact on the stronger baht QoQ. We retain our view that its 2015E earnings should be healthier than 2014 with higher market GIM driven by the gasoline spread and a negligible stock impact (with stock loss and LCM impact of Bt1.1bn in 9M15E vs. a massive impact of Bt16.9bn in 2014). New supply additions to weaken and restrict product spreads in 2016E We keep our product spread assumptions unchanged in 2016E, with market GRM to be lower and aromatics spreads to be restricted given 1) plant resumptions from planned and unplanned shutdowns throughout 2015, particularly in the case of Dragon Aromatics (PX 1.6mta), which will resume operations in Dec‐15 after the fire in Apr‐2015; and 2) new supply additions, including new refining capacities of 0.3mbd from India in 1Q16 and 0.2mbd from China in 3Q16, as well as the ramp‐up of the capacity of the new 0.8mta PX plant from China (COD in 4Q15) and the delay of the commercial startup of the Jamnagar 2.3mta PX plant in India to 1Q16. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core profit (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 (%)
2013 414,575 13,325 9,316 4.57 (24.38) 2.30 44.57 2013 12.21 7.07 1.25 4.1% 10.5% 34.1%
2014 390,090 (5,408) (4,026) (1.97) nm 1.16 40.88 2014 nm nm 1.36 2.1% (4.6%) 40.3%
2015E 315,140 13,466 11,115 5.45 nm 1.91 44.66 2015E 10.23 5.49 1.25 3.4% 12.7% 16.4%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2016E 331,938 11,718 12,310 6.03 10.75 2.11 48.69 2016E 9.24 5.69 1.15 3.8% 12.9% 7.4%
2017E 349,140 11,083 11,260 5.52 (8.53) 1.93 52.18 2017E 10.10 5.46 1.07 3.5% 10.9% 0.7%
Expect a net loss of Bt2.2bn in 3Q15E We expect TOP to mark a Bt2.2bn net loss in 3Q15E, close to 3Q14 but reversing from the upbeat profit in 2Q15, largely blamed on stock loss (US$4.7/bbl, approximately Bt4.4bn) and forex loss (Bt2.6bn). Stripping out the forex loss, it’s likely to deliver a slim Bt410mn core profit (including stock loss impact as the recurring item), thanks to hedging gain (~Bt560mn) and the non‐core contribution (totalling Bt676mn from other income and the profit contribution from affiliates) being the cushion despite the drop in accounting GIM, particularly QoQ, to US$3.2/bbl. We expect its market GIM to stand at US$7.9/bbl in 3Q15E, with a refinery contribution of US$6.4/bbl, an aromatics contribution of US$0.6/bbl and a lube base contribution of US$0.9/bbl. The weakening market GIM, particularly QoQ, is mainly due to 1) the lower crack spreads of middle distillates (gasoil/jet) and fuel oil more than offsetting the lower input cost savings from a lower crude premium/yield loss/freight; 2) the lower BZ spread in line with the fading styrene monomer (SM) demand linked to the slowdown of the Chinese economy; and 3) the higher spot sales of lube base (50%) with a higher discount given, mismatching with the market benchmark with the higher spread driven by the lower feedstock (fuel oil). However, due to the larger stock loss of US$4.7/bbl (netting off a US$1/bbl lesser impact on inventory value in baht terms given baht depreciation), we expect TOP’s accounting GIM to be squeezed to US$3.2/bbl (vs. US$0.5/bbl in 3Q14 and US$11.4/bbl in 2Q15). Figure 1: TOP’s 3Q15E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn(Ls) from affiliates Minority interests Net profit (loss) Core profit (loss)* Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
3Q14
2Q15
3Q15E
88,254 (2,575) (1,406) (1,004) 1,124 118 561 ‐ 229 (86) (2,175) (2,737) (1.07) (2.92) (1.59) (2.46) 2.45 (3.10) 0.87 43.71 (9.58)
79,036 9,179 10,097 (963) 214 (361) (1,179) ‐ 164 (110) 6,228 7,407 3.05 11.61 12.78 7.88 3.39 8.79 0.77 45.54 27.56
64,917 902 1,812 (653) 875 (151) (2,625) ‐ 193 (82) (2,215) 410 (1.09) 1.39 2.79 (3.41) 3.25 0.35 0.78 43.55 (9.75)
% YoY
% QoQ
(26.4) nm nm (34.9) (22.1) nm nm nm (16.0) (4.9) nm nm nm
(17.9) (90.2) (82.1) (32.1) 308.0 (58.1) 122.6 nm 17.5 (25.6) nm (94.5) nm
Source: KT ZMICO Research Note: *including stock gain (loss) impact as the recurring item
9M14
9M15E
301,545 2,500 5,748 (2,974) 3,133 (531) 1,544 ‐ 551 (198) 2,363 819 1.15 0.83 1.91 0.78 2.45 0.28 0.87 43.71 3.53
215,319 15,288 17,903 (2,573) 1,593 (865) (3,128) ‐ 619 (270) 8,511 11,639 4.16 7.10 8.31 3.95 3.25 5.11 0.78 43.55 12.77
% YoY (28.6) 511.5 211.5 (13.5) (49.2) 63.0 nm nm 12.5 36.6 260.2 1,321 262.1
2014
2015E
390,090 (4,060) (189) (3,966) 3,917 920 996 386 744 (322) (4,026) (5,408) (1.97) (1.04) (0.05) (1.03) 2.68 (1.69) 0.96 40.88 (4.62)
315,140 18,861 23,445 (3,272) 1,500 (1,565) (2,351) ‐ 1,008 (350) 11,115 13,466 5.45 5.99 7.44 3.53 3.36 4.93 0.83 44.66 12.74
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
% YoY
YTD (% 15E)
(19.2) nm nm (17.5) (61.7) nm nm (100) 35.5 8.8 nm nm nm
68.3 81.1 76.4 78.6 106.2 55.3 133.0 nm 61.5 77.2 76.6 86.4 76.4
Figure 2: TOP’s product spreads and operating rate
A)
C)
TOP’s market GRM and accounting GRM, as well as operating rate
TLB’s lube base spread and operating rate
Source: TOP, KT ZMICO Research
B)
TPX’s aromatics spreads and operating rate
D)
TOP’s market GIM and accounting GIM
Source: TOP, KT ZMICO Research Note: Accounting GIM excludes the LCM impact
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 3: TOP’s PBV band and valuation comparison with regional peers
A)
TOP’s PBV Band
Source: Bloomberg, KT ZMICO Research
B)
2016E PBV/ROE comparison with regional peers
Figure 4: TOP’s valuation comparison with regional peers NAME
Mkt Cap (US$Mn)
SK INNOVATION CO LTD S‐OIL CORP GS HOLDINGS S. KOREA PETROCHINA CO LTD‐H CHINA PETROLEUM & CHEMICAL‐H SINOPEC SHANGHAI PETROCHE‐A CHINA BHARAT PETROLEUM CORP LTD HINDUSTAN PETROLEUM CORP RELIANCE INDUSTRIES LTD INDIAN OIL CORP LTD INDIA THAI OIL PCL IRPC PCL PTT GLOBAL CHEMICAL BANGCHAK PETROLEUM PCL ESSO THAILAND PCL THAILAND AVERAGE
8,812 6,635 3,938 241,597 95,133 9,518 9,999 4,169 47,488 14,812 3,193 2,409 7,528 1,392 525
PER (x) 15E 16E
PBV (x) 15E 16E
EV/EBITDA (x) 15E 16E
YLD (%) 15E 16E
ROE (%) 15E 16E
8.2 9.4 na 8.8 18.5 13.8 na 16.2 11.2 9.6 11.7 8.9 10.3 10.2 10.2 11.2 11.0 13.0 11.1 11.6
0.6 1.4 0.7 0.9 0.9 1.0 4.0 2.0 2.4 1.7 1.2 1.2 1.6 1.2 1.2 1.1 1.3 1.4 1.2 1.4
6.5 6.9 8.3 7.2 7.8 5.6 12.0 8.5 7.4 7.3 9.4 6.5 7.7 5.5 10.1 6.5 6.9 7.2 7.2 7.7
2.7 2.9 2.6 2.7 2.1 2.9 1.1 2.0 2.7 3.8 1.1 3.1 2.7 3.4 3.3 4.0 3.6 0.6 3.0 2.6
7.8 15.6 7.9 10.4 4.3 6.3 15.3 8.6 23.3 18.3 11.1 14.6 16.8 12.7 11.9 10.3 13.1 15.6 12.7 12.2
8.6 9.3 8.3 8.7 14.5 11.5 25.4 17.1 10.8 8.8 10.1 8.5 9.6 9.2 9.8 8.4 8.7 8.2 8.9 11.1
0.6 1.2 0.6 0.8 0.9 1.0 3.6 1.8 2.1 1.5 1.1 1.1 1.5 1.1 1.1 1.0 1.2 1.2 1.1 1.3
6.9 7.1 8.1 7.4 7.2 5.1 11.5 7.9 7.0 6.9 7.8 6.1 7.0 5.7 7.6 5.6 6.2 5.8 6.2 7.1
2.7 2.8 2.7 2.7 2.5 3.4 1.2 2.4 2.7 3.7 1.2 3.2 2.7 3.8 5.1 5.3 4.6 1.9 4.2 3.0
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
7.0 14.2 8.3 9.8 5.1 7.0 14.4 8.8 21.1 17.5 11.8 13.6 16.0 12.9 11.4 12.7 14.8 17.1 13.8 12.1
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 (%)
2012 447,432 (432,312) 15,119 (2,631) 19,128 6,640 12,488 (2,343) 2,240 12,385 (1,789) 1,987 0 73 (336) 12,320 6.04 6.04 10,333 5.06 2.70
2013 414,575 (397,542) 17,033 (2,582) 20,484 6,033 14,451 (3,786) 3,366 14,031 (1,160) (3,111) (897) 676 (222) 9,316 4.57 4.57 13,325 6.53 2.30
2014 390,090 (394,150) (4,060) (2,641) (189) 6,512 (6,701) (3,966) 3,917 (6,750) 920 996 386 744 (322) (4,026) (1.97) (1.97) (5,408) (2.65) 1.16
2015E 315,140 (296,279) 18,861 (2,716) 23,445 7,299 16,146 (3,272) 1,500 14,373 (1,565) (2,351) 0 1,008 (350) 11,115 5.45 5.45 13,466 6.60 1.91
2016E 331,938 (315,297) 16,641 (2,863) 21,294 7,517 13,777 (2,664) 1,500 12,614 (1,542) 592 0 1,046 (400) 12,310 6.03 6.03 11,718 5.74 2.11
2017E 349,140 (332,957) 16,183 (2,946) 20,968 7,731 13,237 (2,528) 1,500 12,209 (1,900) 177 0 1,174 (400) 11,260 5.52 5.52 11,083 5.43 1.93
2012 28,322 27,090 40,004 64,864 10,397 170,676 4,635 42,162 79,953 20,400 86,535 4,189 170,676
2013 43,815 28,746 48,509 65,468 22,125 208,662 13,478 61,385 113,681 20,400 90,927 4,054 208,662
2014 46,483 16,141 28,533 79,120 23,331 193,607 12,836 67,265 105,763 20,400 83,396 4,448 193,607
2015E 60,285 17,268 20,293 70,911 22,331 191,088 13,256 61,926 95,178 20,400 91,112 4,798 191,088
2016E 53,739 18,188 21,596 69,496 23,454 186,473 1,321 59,805 81,952 20,400 99,323 5,198 186,473
2017E 58,904 19,131 22,805 67,796 24,626 193,262 3,321 56,284 81,206 20,400 106,458 5,598 193,262
2012 12,320 (1,987) 6,640 2,414 19,387 (6,410)
2013 9,316 3,111 6,033 (5,895) 12,566 (17,011)
2014 (4,026) (996) 6,512 20,360 21,850 (21,559)
2015E 11,115 2,351 7,299 597 21,362 781
2016E 12,310 (592) 7,517 (2,484) 16,750 (6,648)
2017E 11,260 (177) 7,731 (2,571) 16,242 (6,578)
(6,410) 1,109 602 (6,120) 461 (3,947) 9,030 12,977 6.36
(17,011) 28,066 630 (5,100) (3,658) 19,938 15,492 (4,446) (2.18)
(21,559) 5,238 446 (3,529) 221 2,376 2,668 292 0.14
781 (4,919) 388 (3,128) (681) (8,341) 13,802 22,143 10.85
(6,648) (14,056) 646 (4,099) 862 (16,647) (6,546) 10,102 4.95
(6,578) (1,521) 774 (4,125) 373 (4,499) 5,165 9,664 4.74
2012 0.3 (29.4) (17.1) 3.4 4.3 2.8 2.8 2.3 14.4
2013 (7.3) 7.1 (24.4) 4.1 4.9 3.5 2.2 3.2 8.3
2014 (5.9) (100.9) (143.2) (1.0) (0.0) (1.7) (1.0) (1.4) 13.6
2015E (19.2) (12,524.3) 376.1 6.0 7.4 5.1 3.5 4.3 10.9
2016E 5.3 (9.2) 10.8 5.0 6.4 4.2 3.7 3.5 12.2
2017E 5.2 (1.5) (8.5) 4.6 6.0 3.8 3.2 3.2 15.6
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG. KT ZMICO is a co‐underwriter of KOOL, ORI, SCI, SR.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Thai Oil Underperform (16E TP Bt57.00)
Company Update
Close Bt55.75
Energy & Utilities October 26, 2015
Earnings upgrade / Earnings downgrade / Overview unchanged
Reverse to net loss in 3Q15E due to stock loss and FX loss Price Performance (%)
Source: SET Smart
FY15
FY16
Consensus EPS (Bt)
5.984
5.860
KT ZMICO vs. consensus Share data
‐8.9%
2.9%
Reuters / Bloomberg
TOP.BK/TOP TB
Paid‐up Shares (m)
2,040.03
Par (Bt)
10.00
Market cap (Bt bn / US$ m)
114.00/3,198.00
Foreign limit / actual (%)
40.00/23.63
52 week High / Low (Bt)
60.00/41.00
Avg. daily T/O (shares 000)
5,734.00
NVDR (%)
7.43
Estimated free float (%)
50.04
Beta
1.32
URL
www.thaioilgroup.com
CGR
Anti‐corruption
Level 4 (Certified)
Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
Supply risk leading to lack of earnings catalysts While the company’s 2015E earnings will be healthier than the low‐base 2014 earnings despite the weak 3Q15 earnings, we don’t see any positive catalysts to drive its 2016E core profit amidst larger net refining additions and the continuing oversupply situation in the aromatics market. Meanwhile, growth story projects (including the 200kbd CDU#4 and unit upgrading from fuel oil to diesel) are under study and likely to take a long time to bear fruit; thus, we maintain Underperform on TOP. Expect a net loss of Bt2.2bn in 3Q15E We expect TOP to mark a Bt2.2bn net loss in 3Q15E, close to 3Q14 but reversing from the upbeat profit in 2Q15, largely blamed on stock loss (US$4.7/bbl, approximately Bt4.4bn) and forex loss (Bt2.6bn). Stripping out the forex loss, it’s likely to deliver a slim Bt410mn core profit (including stock loss impact as the recurring item), thanks to hedging gain (~Bt560mn) and the non‐core contribution (totalling Bt676mn from other income and the profit contribution from affiliates) being the cushion despite the drop in accounting GIM, particularly QoQ, to US$3.2/bbl (see details on page 2). Earnings forecasts maintained Given that the 9M15E core profit and NP represent 86% and 77% of our full‐ year forecasts of Bt13.5bn and Bt11.1bn, respectively, our 2015E forecasts are likely to be achievable given the possible reversal to stock gain in 4Q15E should the crude oil price bounce back by the winter season and a lesser forex impact on the stronger baht QoQ. We retain our view that its 2015E earnings should be healthier than 2014 with higher market GIM driven by the gasoline spread and a negligible stock impact (with stock loss and LCM impact of Bt1.1bn in 9M15E vs. a massive impact of Bt16.9bn in 2014). New supply additions to weaken and restrict product spreads in 2016E We keep our product spread assumptions unchanged in 2016E, with market GRM to be lower and aromatics spreads to be restricted given 1) plant resumptions from planned and unplanned shutdowns throughout 2015, particularly in the case of Dragon Aromatics (PX 1.6mta), which will resume operations in Dec‐15 after the fire in Apr‐2015; and 2) new supply additions, including new refining capacities of 0.3mbd from India in 1Q16 and 0.2mbd from China in 3Q16, as well as the ramp‐up of the capacity of the new 0.8mta PX plant from China (COD in 4Q15) and the delay of the commercial startup of the Jamnagar 2.3mta PX plant in India to 1Q16. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Core profit (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 (%)
2013 414,575 13,325 9,316 4.57 (24.38) 2.30 44.57 2013 12.21 7.07 1.25 4.1% 10.5% 34.1%
2014 390,090 (5,408) (4,026) (1.97) nm 1.16 40.88 2014 nm nm 1.36 2.1% (4.6%) 40.3%
2015E 315,140 13,466 11,115 5.45 nm 1.91 44.66 2015E 10.23 5.49 1.25 3.4% 12.7% 16.4%
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
2016E 331,938 11,718 12,310 6.03 10.75 2.11 48.69 2016E 9.24 5.69 1.15 3.8% 12.9% 7.4%
2017E 349,140 11,083 11,260 5.52 (8.53) 1.93 52.18 2017E 10.10 5.46 1.07 3.5% 10.9% 0.7%
Expect a net loss of Bt2.2bn in 3Q15E We expect TOP to mark a Bt2.2bn net loss in 3Q15E, close to 3Q14 but reversing from the upbeat profit in 2Q15, largely blamed on stock loss (US$4.7/bbl, approximately Bt4.4bn) and forex loss (Bt2.6bn). Stripping out the forex loss, it’s likely to deliver a slim Bt410mn core profit (including stock loss impact as the recurring item), thanks to hedging gain (~Bt560mn) and the non‐core contribution (totalling Bt676mn from other income and the profit contribution from affiliates) being the cushion despite the drop in accounting GIM, particularly QoQ, to US$3.2/bbl. We expect its market GIM to stand at US$7.9/bbl in 3Q15E, with a refinery contribution of US$6.4/bbl, an aromatics contribution of US$0.6/bbl and a lube base contribution of US$0.9/bbl. The weakening market GIM, particularly QoQ, is mainly due to 1) the lower crack spreads of middle distillates (gasoil/jet) and fuel oil more than offsetting the lower input cost savings from a lower crude premium/yield loss/freight; 2) the lower BZ spread in line with the fading styrene monomer (SM) demand linked to the slowdown of the Chinese economy; and 3) the higher spot sales of lube base (50%) with a higher discount given, mismatching with the market benchmark with the higher spread driven by the lower feedstock (fuel oil). However, due to the larger stock loss of US$4.7/bbl (netting off a US$1/bbl lesser impact on inventory value in baht terms given baht depreciation), we expect TOP’s accounting GIM to be squeezed to US$3.2/bbl (vs. US$0.5/bbl in 3Q14 and US$11.4/bbl in 2Q15). Figure 1: TOP’s 3Q15E earnings preview Profit and Loss (Btmn) Year‐end 31 Dec Revenue Gross profit EBITDA Interest expense Other income Income tax Forex gain (loss) Extraordinary Items Gn(Ls) from affiliates Minority interests Net profit (loss) Core profit (loss)* Reported EPS (Bt) Gross margin (%) EBITDA margin (%) Net margin (%) Current ratio (x) Interest coverage (x) Debt / equity (x) BVPS (Bt) ROE (%)
3Q14
2Q15
3Q15E
88,254 (2,575) (1,406) (1,004) 1,124 118 561 ‐ 229 (86) (2,175) (2,737) (1.07) (2.92) (1.59) (2.46) 2.45 (3.10) 0.87 43.71 (9.58)
79,036 9,179 10,097 (963) 214 (361) (1,179) ‐ 164 (110) 6,228 7,407 3.05 11.61 12.78 7.88 3.39 8.79 0.77 45.54 27.56
64,917 902 1,812 (653) 875 (151) (2,625) ‐ 193 (82) (2,215) 410 (1.09) 1.39 2.79 (3.41) 3.25 0.35 0.78 43.55 (9.75)
% YoY
% QoQ
(26.4) nm nm (34.9) (22.1) nm nm nm (16.0) (4.9) nm nm nm
(17.9) (90.2) (82.1) (32.1) 308.0 (58.1) 122.6 nm 17.5 (25.6) nm (94.5) nm
Source: KT ZMICO Research Note: *including stock gain (loss) impact as the recurring item
9M14
9M15E
301,545 2,500 5,748 (2,974) 3,133 (531) 1,544 ‐ 551 (198) 2,363 819 1.15 0.83 1.91 0.78 2.45 0.28 0.87 43.71 3.53
215,319 15,288 17,903 (2,573) 1,593 (865) (3,128) ‐ 619 (270) 8,511 11,639 4.16 7.10 8.31 3.95 3.25 5.11 0.78 43.55 12.77
% YoY (28.6) 511.5 211.5 (13.5) (49.2) 63.0 nm nm 12.5 36.6 260.2 1,321 262.1
2014
2015E
390,090 (4,060) (189) (3,966) 3,917 920 996 386 744 (322) (4,026) (5,408) (1.97) (1.04) (0.05) (1.03) 2.68 (1.69) 0.96 40.88 (4.62)
315,140 18,861 23,445 (3,272) 1,500 (1,565) (2,351) ‐ 1,008 (350) 11,115 13,466 5.45 5.99 7.44 3.53 3.36 4.93 0.83 44.66 12.74
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% YoY
YTD (% 15E)
(19.2) nm nm (17.5) (61.7) nm nm (100) 35.5 8.8 nm nm nm
68.3 81.1 76.4 78.6 106.2 55.3 133.0 nm 61.5 77.2 76.6 86.4 76.4
Figure 2: TOP’s product spreads and operating rate
A)
C)
TOP’s market GRM and accounting GRM, as well as operating rate
TLB’s lube base spread and operating rate
Source: TOP, KT ZMICO Research
B)
TPX’s aromatics spreads and operating rate
D)
TOP’s market GIM and accounting GIM
Source: TOP, KT ZMICO Research Note: Accounting GIM excludes the LCM impact
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
Figure 3: TOP’s PBV band and valuation comparison with regional peers
A)
TOP’s PBV Band
Source: Bloomberg, KT ZMICO Research
B)
2016E PBV/ROE comparison with regional peers
Figure 4: TOP’s valuation comparison with regional peers NAME
Mkt Cap (US$Mn)
SK INNOVATION CO LTD S‐OIL CORP GS HOLDINGS S. KOREA PETROCHINA CO LTD‐H CHINA PETROLEUM & CHEMICAL‐H SINOPEC SHANGHAI PETROCHE‐A CHINA BHARAT PETROLEUM CORP LTD HINDUSTAN PETROLEUM CORP RELIANCE INDUSTRIES LTD INDIAN OIL CORP LTD INDIA THAI OIL PCL IRPC PCL PTT GLOBAL CHEMICAL BANGCHAK PETROLEUM PCL ESSO THAILAND PCL THAILAND AVERAGE
8,812 6,635 3,938 241,597 95,133 9,518 9,999 4,169 47,488 14,812 3,193 2,409 7,528 1,392 525
PER (x) 15E 16E
PBV (x) 15E 16E
EV/EBITDA (x) 15E 16E
YLD (%) 15E 16E
ROE (%) 15E 16E
8.2 9.4 na 8.8 18.5 13.8 na 16.2 11.2 9.6 11.7 8.9 10.3 10.2 10.2 11.2 11.0 13.0 11.1 11.6
0.6 1.4 0.7 0.9 0.9 1.0 4.0 2.0 2.4 1.7 1.2 1.2 1.6 1.2 1.2 1.1 1.3 1.4 1.2 1.4
6.5 6.9 8.3 7.2 7.8 5.6 12.0 8.5 7.4 7.3 9.4 6.5 7.7 5.5 10.1 6.5 6.9 7.2 7.2 7.7
2.7 2.9 2.6 2.7 2.1 2.9 1.1 2.0 2.7 3.8 1.1 3.1 2.7 3.4 3.3 4.0 3.6 0.6 3.0 2.6
7.8 15.6 7.9 10.4 4.3 6.3 15.3 8.6 23.3 18.3 11.1 14.6 16.8 12.7 11.9 10.3 13.1 15.6 12.7 12.2
8.6 9.3 8.3 8.7 14.5 11.5 25.4 17.1 10.8 8.8 10.1 8.5 9.6 9.2 9.8 8.4 8.7 8.2 8.9 11.1
0.6 1.2 0.6 0.8 0.9 1.0 3.6 1.8 2.1 1.5 1.1 1.1 1.5 1.1 1.1 1.0 1.2 1.2 1.1 1.3
6.9 7.1 8.1 7.4 7.2 5.1 11.5 7.9 7.0 6.9 7.8 6.1 7.0 5.7 7.6 5.6 6.2 5.8 6.2 7.1
2.7 2.8 2.7 2.7 2.5 3.4 1.2 2.4 2.7 3.7 1.2 3.2 2.7 3.8 5.1 5.3 4.6 1.9 4.2 3.0
Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
7.0 14.2 8.3 9.8 5.1 7.0 14.4 8.8 21.1 17.5 11.8 13.6 16.0 12.9 11.4 12.7 14.8 17.1 13.8 12.1
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 (%)
2012 447,432 (432,312) 15,119 (2,631) 19,128 6,640 12,488 (2,343) 2,240 12,385 (1,789) 1,987 0 73 (336) 12,320 6.04 6.04 10,333 5.06 2.70
2013 414,575 (397,542) 17,033 (2,582) 20,484 6,033 14,451 (3,786) 3,366 14,031 (1,160) (3,111) (897) 676 (222) 9,316 4.57 4.57 13,325 6.53 2.30
2014 390,090 (394,150) (4,060) (2,641) (189) 6,512 (6,701) (3,966) 3,917 (6,750) 920 996 386 744 (322) (4,026) (1.97) (1.97) (5,408) (2.65) 1.16
2015E 315,140 (296,279) 18,861 (2,716) 23,445 7,299 16,146 (3,272) 1,500 14,373 (1,565) (2,351) 0 1,008 (350) 11,115 5.45 5.45 13,466 6.60 1.91
2016E 331,938 (315,297) 16,641 (2,863) 21,294 7,517 13,777 (2,664) 1,500 12,614 (1,542) 592 0 1,046 (400) 12,310 6.03 6.03 11,718 5.74 2.11
2017E 349,140 (332,957) 16,183 (2,946) 20,968 7,731 13,237 (2,528) 1,500 12,209 (1,900) 177 0 1,174 (400) 11,260 5.52 5.52 11,083 5.43 1.93
2012 28,322 27,090 40,004 64,864 10,397 170,676 4,635 42,162 79,953 20,400 86,535 4,189 170,676
2013 43,815 28,746 48,509 65,468 22,125 208,662 13,478 61,385 113,681 20,400 90,927 4,054 208,662
2014 46,483 16,141 28,533 79,120 23,331 193,607 12,836 67,265 105,763 20,400 83,396 4,448 193,607
2015E 60,285 17,268 20,293 70,911 22,331 191,088 13,256 61,926 95,178 20,400 91,112 4,798 191,088
2016E 53,739 18,188 21,596 69,496 23,454 186,473 1,321 59,805 81,952 20,400 99,323 5,198 186,473
2017E 58,904 19,131 22,805 67,796 24,626 193,262 3,321 56,284 81,206 20,400 106,458 5,598 193,262
2012 12,320 (1,987) 6,640 2,414 19,387 (6,410)
2013 9,316 3,111 6,033 (5,895) 12,566 (17,011)
2014 (4,026) (996) 6,512 20,360 21,850 (21,559)
2015E 11,115 2,351 7,299 597 21,362 781
2016E 12,310 (592) 7,517 (2,484) 16,750 (6,648)
2017E 11,260 (177) 7,731 (2,571) 16,242 (6,578)
(6,410) 1,109 602 (6,120) 461 (3,947) 9,030 12,977 6.36
(17,011) 28,066 630 (5,100) (3,658) 19,938 15,492 (4,446) (2.18)
(21,559) 5,238 446 (3,529) 221 2,376 2,668 292 0.14
781 (4,919) 388 (3,128) (681) (8,341) 13,802 22,143 10.85
(6,648) (14,056) 646 (4,099) 862 (16,647) (6,546) 10,102 4.95
(6,578) (1,521) 774 (4,125) 373 (4,499) 5,165 9,664 4.74
2012 0.3 (29.4) (17.1) 3.4 4.3 2.8 2.8 2.3 14.4
2013 (7.3) 7.1 (24.4) 4.1 4.9 3.5 2.2 3.2 8.3
2014 (5.9) (100.9) (143.2) (1.0) (0.0) (1.7) (1.0) (1.4) 13.6
2015E (19.2) (12,524.3) 376.1 6.0 7.4 5.1 3.5 4.3 10.9
2016E 5.3 (9.2) 10.8 5.0 6.4 4.2 3.7 3.5 12.2
2017E 5.2 (1.5) (8.5) 4.6 6.0 3.8 3.2 3.2 15.6
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
Note: KT ZMICO is a partnership between KTB and ZMICO. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, KBS, PSL, SVH, VNG, ZMICO, CPI . KT ZMICO is a financial advisor for U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE, SAFARI, PACE, TPOLY, TFG. KT ZMICO is a co‐underwriter of KOOL, ORI, SCI, SR.
Anti‐corruption Progress Indicator
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 BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 6 of 6
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
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nd
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Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
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624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
