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Equity Talk
Monday, May 18, 2015
Analyst Meeting
PTT Global Chemical
PTTGC
Rec. : BUY
Marching on as olefins leader
As a long-term plan, PTTGC sets its focus to an olefins business, investing in countries with
potential for high growth in order to boost profit growth in the future. P/E ratio is the
lowest among peers. BUY is recommended.
 Expanding investments to increase growth
There was nothing new from the analyst meeting last Friday. PTTGC is still
focusing on two major projects to add growth in the future, which are 1)
investment in an ethane cracker with ethylene production capacity of 1 million
tons a year in Ohio, the US, which will start a construction in 3Q16 and
commence a commercial run in 4Q20, and 2) a joint venture with Pertamina in
a naphtha cracker with a production capacity of 1.5 million tons a year in
Indonesia, which will start a construction in 2Q17 and commence a commercial
run in 2022. In addition, the company will increasingly develop green projects
in order to become a center of a bio business with oil palm and sugar cane as
raw materials in the future; PTTGC has previously invested in some of these
businesses, e.g. Oleochemical and PLA, but has not yet generated significant
profit.
Current Price (B): 63.00
Target Price (B): 67.50
Upside : 7.1%
Dividend Yield : 5.3%
Total Return : 12.5%
Market Cap. (Bm) : 284,057.49
CG Score:
Technical Chart
 Olefins is hero in 2015
We maintain our FY2015 forecast, projecting the profit to gradually rebound in
the rest of the year. The olefins business will be playing an important role in
boosting PTTGC’s profit, particularly in 2H15 after the refinery business enters
a low season while GRM may also weaken as a result of increasing supply
globally. Similarly, a projected growth of aromatics supply in 2H15 may
depress overall aromatics spreads. In conclusion, FY2015 profit is anticipated to
show as much as 97.8%yoy growth.
 Lowest P/E ratio among peers. BUY reiterated
2015 fair value is B67.50. We reiterate BUY; its current P/E ratio is only 9.5x,
which is lower than the regional average; dividend yield can be expected at
5.4% p.a.
ASPS vs IAA concensus
EPS (B)
ASPS
Cons
2015F
6.60
6.31
%diff
5%
2016F
7.35
6.55
12%
Source: IAA concensus and ASPS
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 (%)
Source : ASPS Research
FY12A
562,811
34,001
7.54
52.79
8.35
1.19
35,865
3.40
5.4%
15.23
FY13A
549,189
33,277
7.38
54.39
8.54
1.16
34,818
3.40
5.4%
13.77
FY14A
574,010
15,036
3.33
53.64
18.89
1.17
14,092
2.37
3.8%
6.17
FY15F
598,470
29,740
6.60
58.26
9.55
1.08
31,757
3.40
5.4%
12.81
FY16F
605,555
33,162
7.35
62.51
8.57
1.01
36,757
3.40
5.4%
13.81
Nalinrat Kittikumpolrat
License No.: 018350
[email protected]
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 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.
 Expanding investments to increase growth
There was nothing new from the analyst meeting last Friday. PTTGC is still
focusing on two major projects to add growth in the future. 1) The company is
investing in an ethane cracker with ethylene production capacity of 1 million
tons a year in Ohio, the US, and also plans to extend its coverage to
downstream products, i.e. HDPE, MEG, and EO. Now PTTGC is seeking an
investment partner to reduce risk for it is a mega project that requires
investment budget of as much as US$5.7bn. The construction is anticipated in
3Q16 and a commercial run in 4Q20. 2) The company is forming a joint venture
with Pertamina to invest in a naphtha cracker with a production capacity of 1.5
million tons a year in Indonesia. Now PTTGC is studying the project in details.
The construction is anticipated in 2Q17 and a commercial run in 2022.
In addition, the company will increasingly develop green projects in order to
become a center of a bio business with oil palm and sugar cane as raw
materials in the future; PTTGC has previously invested in some of these
businesses, e.g. Oleochemical and PLA, but has not yet generated significant
profit.
 Olefins is hero in 2015
We maintain our FY2015 forecast, projecting the profit to gradually rebound in
the rest of the year. The olefins business will be playing an important role in
boosting PTTGC’s profit from gradually increasing demands amidst limitedly
increasing supply (reflected from a significantly improving spread since April),
particularly in 2H15 after the refinery business enters a low season. GRM may
also weaken in 2H15 as a result of around 1.7 million barrel/day increasing
supply globally versus the demand growth of only 900,000 barrels/day.
Similarly, a projected growth of aromatics supply in 2H15 may depress overall
aromatics spreads.
In conclusion, FY2015 profit is anticipated to show as much as 97.8%yoy
growth.
PTTGC’s Investment Plan
Source: PTTGC
HDPE trend price and spread
MEG trend price and spread
Source: PTTGC
Source: PTTGC
Regional Petrochemical Recommendations
Company
CHINA
SINOPEC CORP-H
PETROCHINA-H
TAIWAN
NAN YA PLASTICS
FORMOSA PLASTIC
FORMOSA CHEM & F
JAPAN
TOSOH CORP
JX HD
MITSUI CHEMICALS
HONG KONG
SINOPEC KANTONS
SINOPEC SHANG-H
INDIA
RELIANCE INDS
BHARAT PETROL
INDIAN OIL CORP
Malaysia
PCHEM
PETRONAS DAGANGA
THAILAND
PTT PCL
PTT GLOBAL CHEM
THAI OIL PCL
IRPC PCL
BANGCHAK PETROLE
INDORAMA VENTURE
AVERAGE
Remark: -
PBV
2015F
2016F
Key Risks
PER
2015F
2016F
REC./BB
Rating
Current
Price
Target Price
Upside
(%)
3.50
3.03
6.8
9.3
7.2
9.4
5.4%
0.9%
1.0
1.1
1.0
1.1
19.2
23.9
12.3
14.7
4.38
4.14
2.96
73.6
77.9
77.1
80.5
85.7
73.1
9.3%
10.0%
-5.2%
1.8
1.7
1.6
1.7
1.6
1.5
18.3
20.4
24.2
16.6
18.3
20.6
3.73
3.55
3.47
755.0
537.3
394.0
681.1
515.0
373.8
-9.8%
-4.2%
-5.1%
1.5
0.7
1.0
1.3
0.7
0.9
12.1
9.0
15.6
11.7
8.1
11.8
4.45
3.36
6.9
4.1
7.7
3.6
12.6%
-11.9%
1.3
1.9
1.2
1.8
17.4
21.3
13.3
18.6
4.60
4.38
4.17
878.2
756.7
334.0
1057.6
846.2
402.5
20.4%
11.8%
20.5%
1.2
2.6
1.1
1.0
2.3
1.1
11.0
17.5
13.9
9.0
12.9
9.4
2.75
2.00
6.1
19.8
5.3
18.0
-13.1%
-9.0%
2.0
3.7
1.9
3.6
18.7
27.5
16.4
24.7
BUY
BUY
HOLD
BUY
HOLD
BUY
352.00
62.25
51.75
4.24
33.75
24.50
402.50
67.50
54.00
5.20
33.50
32.00
14.3%
8.4%
4.3%
22.6%
-0.7%
30.6%
1.4
1.1
1.0
1.1
1.3
1.5
1.4
1.2
1.0
1.0
1.0
1.2
1.4
1.3
9.9
9.4
10.4
10.5
10.6
27.4
14.9
8.4
8.5
8.7
9.4
9.2
18.7
13.4
1) There could be an unplanned shutdown of refinery,
olefins plant, and aromatics plants.
2) GRM and petrochemical spreads may miss our
forecast.
3) As a result of the government's intervention on
prices of raw materials and products, PTTGC's actual
earnings may miss our forecast.
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 : ASPS Research / Bloomberg
Source : ASPS Research
2015-2016F Earnings Forecast
Income Statement (Bm)
Cash Flows Statement (Bm)
Ended 31 Dec.
Sales
2013
2014
2015F
2016F
555,683
579,496
600,470
606,555
Cost of sales
(498,042)
(543,647)
(549,011)
(549,884)
Gross profit
57,641
35,849
51,459
56,671
(14,031)
(14,565)
(11,842)
(12,004)
(6,084)
(5,487)
(7,960)
(8,010)
Other expenses
-
2,239
Other incomes
(78)
SG&A
Interest expenses
Net profit before tax
2014
2015F
2016F
Net Profit
32,841
13,532
29,740
33,162
16,737
17,371
13,578
15,167
(15,167)
Adjustments for :
Depreciation and amortisation
Unrealized (gain) loss on exchange rate
-
-
Others
(16,737)
(17,371)
(13,578)
100
100
Changes in opearting assets and liabilities
13,364
32,108
23,833
23,341
34,818
14,092
31,757
36,757
Net Cash flows from operating activities
46,205
45,641
53,574
56,503
1,976
559
3,017
4,595
36,794
14,651
34,774
41,352
-
-
-
-
33,277
15,036
29,740
33,162
7.38
3.33
6.60
7.35
Fx gain/loss
Net Profit
2013
534
Income taxes
Normalized profit
Ended 31 Dec.
Cash flows from operating activities
EPS
Cash flows from investing activities
Increase / Decrease in related parties
(17,082)
#REF!
(20,000)
(20,000)
Net cash flows from investing activities
(22,272)
(25,527)
(25,000)
(25,000)
Cash flows from investing activities
Increase / Decrease in debts
22,303
11,401
(5,000)
(14,338)
(29,945)
(12,960)
(8,010)
Dividends paid
(19,104)
(15,097)
(15,097)
(15,097)
Net cash flows from financing activities
(33,534)
(22,740)
(16,656)
(28,107)
(9,600)
(2,626)
11,917
3,396
Others
Sales growth (QoQ)
-2.6%
4.3%
3.6%
1.0%
Net profit growth (QoQ)
-2.1%
-54.8%
97.8%
11.5%
Gross profit margin
10.4%
6.2%
8.6%
9.3%
6.0%
2.6%
5.0%
5.5%
Net profit margin
Quarter Income Statement (Bm)
Balance Sheet (Bm)
2Q14
Sales
Net increase in cash and cash equivalents
(92)
3Q14
4Q14
1Q15
Ended 31 Dec.
153,282
146,676
131,598
100,087
Cash and cash equivalents
(132,804)
(91,060)
Cost of sales
(142,429)
(135,218)
Gross profit
10,853
11,458
(1,207)
9,027
SG&A
(5,572)
(3,586)
(2,744)
(2,606)
Interest expenses
(1,393)
(1,303)
(1,364)
(1,360)
Other incomes
1,058
1,332
2,119
Net profit before tax
5,325
8,079
(5,862)
Income taxes
(599)
Normalized profit
4,725
Fx gain/loss
(2)
Minority interest
Profit from assets selling
Net Profit
(521)
7,558
-
963
(4,899)
(401)
290
240
-
-
6,085
7,591
(31)
(4,960)
2014
2015F
2016F
47,405
27,333
30,729
Trade and other receivables
61,592
45,760
32,918
30,540
Inventories
50,238
35,762
26,911
25,554
Current assets
70,701
44,616
68,678
78,890
Net PP&E
231,249
231,209
271,560
290,441
Total assets
432,362
404,752
427,400
448,995
45,655
22,936
26,994
30,501
6,181
(499)
5,682
-
Trade and other payables
Current liabilities
141,474
139,941
52,402
55,147
Total liabilities
187,128
162,876
166,852
166,340
Paid-up share capital
45,088
45,088
45,088
45,088
Share premium
48,724
48,724
48,708
47,792
Retained earnings
143,278
145,613
160,483
177,065
Total shareholders' equity
245,233
241,876
262,687
281,862
Total liabilities and shareholders' equity
432,362
404,752
427,400
448,995
237
5,631
7.6%
-4.3%
-3.7%
24.7%
n.m.
n.m.
7.1%
7.8%
-0.9%
9.0%
Ended 31 Dec.
2013
2014
2015F
2016F
Ended 31 Dec.
2013
2014
2015F
Current Ratio (X)
1.24
1.28
1.14
1.06
THB/USD rate
30.00
33.00
33.00
A/C Receivable Turnover (X)
8.92
12.54
18.18
19.83
Ethylene price (US$/ton)
1,200
1,200
1,200
1,200
Sales growth (QoQ)
Net profit growth (QoQ)
Gross profit margin
-10.3%
916
2013
18,582
-23.9%
Financial Ratio
Financial Assumption
2016F
33.00
9.91
15.20
20.40
21.52
HDPE price (US$/ton)
1,400
1,400
1,500
1,500
10.91
23.70
20.34
18.03
MEG price (US$/ton)
1,100
1,100
1,100
1,100
0.76
0.67
0.64
0.59
Spread PX (US$/Ton)
550
350
350
400
ROA (%)
7.66%
3.59%
7.15%
7.57%
Petrochemical Capacity (KTA)
2,200
2,200
2,200
2,200
ROE (%)
13.77%
6.17%
11.79%
12.18%
GRM (US$/Barrel)
4.50
4.50
4.50
4.50
Interest Coverage Ratio (X)
Net Gearing (X)
Debt to Equity (X)
Source: Financial Statement / ASPS Research