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Equity Talk
Wednesday, May 6, 2015
1Q15 Results Note
PTT Exploration and Production
PTTEP
Rec. : BUY
Recovering oil prices to boost profit rebound
Global crude oil prices likely have already bottomed out, so PTTEP’s profit would
gradually rebound from now on. The share price has declined until there is a limited
downside; this is a good entry point, hoping for an oil price surge in 2H15.
 1Q15 profit better than expected due to tax item
PTTEP posted 1Q15 net profit of B8.6bn, rebounding from net loss of
B24.4bn in 4Q14, substantially better than expected. Tax expense
decreased significantly from an estimate of B3.6bn to only B583m in this
quarter because an effective tax rate dropped to only 6%; other items were
in line with our forecast. Normalized profit weakened from the prior quarter
for 1) an average selling price of petroleum decreased 13.8%qoq and 2)
sales volume declined 5.8%qoq. Overall, 1Q15 net profit made up 23.6% of
our full year forecast.
 Profit to gradually improve in the rest of 2015
We maintain our FY2015 forecast, projecting PTTEP’s profit to improve
gradually in the rest of the year; oil prices tend to rise continuously from
reviving demands following the world economic rebound and decreasing
oversupply after high-cost petroleum producers lowered their production.
Accordingly, we set Dubai crude oil price assumption at US$70/barrel;
under our projection for a 27.5%yoy decrease in crude oil price, normalized
profit in 2015 would decrease around 27.4%yoy but net profit would grow
69.9%yoy because there would not be massive extraordinary expense like
in 2014.
Current Price (B): 117.00
Target Price (B): 140.00
Upside : 19.7%
Dividend Yield : 3.8%
Total Return : 23.5%
Market Cap. (Bm) : 464,488.29
CG Score:
Technical Chart
 Share price undergoes substantial correction, time to
accumulate
2015 fair value (DCF) is B140. The share price has declined more than 30%
over the past six months, already reflecting decreasing global crude oil
prices; this is a good entry point, hoping for an oil price surge in 2H15.
ASPS vs IAA concensus
EPS (B)
ASPS
Cons
2015F
9.20
7.29
%diff
26%
2016F
12.35
8.46
46%
Source: IAA concensus and ASPS
Key Data
FY: Dec 31
Sales (Bm)
Net Profit (Bm)
EPS (B)
Norm EPS (B)
PER (x)
DPS (B)
Dividend Yield (%)
BVS (B)
PBV (x)
ROE (%)
Source : ASPS Research
FY12A
207,851
57,316
14.44
15.22
8.1
5.80
5.0
82.6
1.4
21.7
FY13A
220,337
56,186
14.15
14.92
8.3
6.00
5.1
96.9
1.2
15.8
FY14A
243,342
21,490
5.41
12.67
21.6
4.50
3.8
104.2
1.1
5.4
FY15F
197,913
36,519
9.20
9.20
12.7
4.50
3.8
99.7
1.2
9.0
FY16F
225,481
49,044
12.35
12.35
9.5
4.50
3.8
107.1
1.1
12.0
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.
 1Q15 profit better than expected due to tax item
substantially better than expected. Tax expense decreased significantly
from an estimate of B3.6bn to only B583m in this quarter because an
effective tax rate dropped to only 6% from the following reasons: 1) the
proportion of profit from locally produced petroleum products, which are
subject to a high tax rate of 38-40% on average, has decreased from 4Q14
while the proportion of profit from petroleum products produced overseas,
which are subject to a tax rate of only 20%, has increased during the same
period, resulting in lower effective tax rate, and 2) due to an effect from
foreign exchange rate after the Baht appreciation against US Dollar, the
company could save tax expense in 1Q15.
Other items were in line with our forecast. Normalized profit weakened from
the prior quarter because of the following factors.
1) Average selling price of petroleum decreased 13.8%qoq to
US$48.74/barrel following 30.3%qoq decreasing Dubai crude oil price to
US$51.9/barrel. LPG price dropped 33.1%qoq to US$50.12/barrel, while
natural gas price slipped 0.4%qoq to US$8.03/million BTU due to its threeto-six-month lag time for the price decrease when compared with crude oil
and because there was gas price restructuring at only three gas fields:
Yanada, Yetagun, and Zawtika. Yet, average gas selling price would
decrease by 10%qoq in 2Q15 since Bongkot project is undertaking price
restructuring in the quarter (twice a year).
2) Sales volume declined 5.8%qoq to 327,000 barrels/day due to lower
sales of Montara project, from 24,000 barrels/day in 4Q14 to 15,000
barrels/day, and Contract 4 (Pailin) project, which has decreased 10,000
barrels/day from 4Q14.
However, there are still positive factors in the quarter. 1) Total cost lowered
as much as 14.3%qoq to US$40.2/barrel, in line with decreasing exploration
cost in this quarter since there would be write-off of only three wells in
Thailand, worth of B100m, compared with B3.3bn in the previous quarter,
decreasing selling and administrative expense on a seasonal effect, and
decreasing tax expense. Overall, 1Q15 net profit made up 23.6% of our full
year forecast.
1Q15 Earnings Result
Key Data (Bm)
Sales
Cost of Sales
Gross Profit
Operating Profit
Net Profit
Norm Profit
EPS (B)
1Q13
53,565
12,916
40,649
30,393
20,258
17,049
5.10
2Q13
53,235
12,999
40,236
27,260
10,664
15,804
2.69
3Q13
55,927
14,578
41,349
27,993
17,811
18,881
4.49
4Q13
57,611
15,426
42,184
23,458
7,453
12,265
1.88
1Q14
58,289
16,007
42,282
25,450
12,421
12,826
3.13
2Q14
63,148
15,525
47,624
27,662
18,187
15,915
4.58
3Q14
62,823
16,230
46,593
25,888
15,284
13,717
3.85
4Q14
59,082
16,387
42,695
(13,539)
(24,401)
6,032
(6.15)
1Q15
46,858
10,876
35,981
11,439
8,616
8,402
2.17
Gross Margin
76%
76%
Op Margin
57%
51%
Gas Price ($/MMBTU)
8.0
8.2
Crude Oil Price($/BBL)
103.7
95.1
Avg. Petroleum Price ($/BOE)
67.0
65.2
Dubai Oil Price($/BBL)
108.2 100.7
Source: Financial Statement / ASPS Research
74%
50%
8.0
100.3
65.7
106.0
73%
41%
7.6
101.5
64.5
105.4
73%
44%
7.8
100.8
64.9
104.4
75%
44%
8.1
104.6
67.7
106.0
74%
41%
8.1
100.2
65.2
101.4
72%
-23%
8.1
74.9
56.5
74.4
77%
24%
8.0
50.1
48.7
51.9
%QoQ
-20.7%
-33.6%
-15.7%
n.m.
n.m.
39.3%
n.m.
%YoY 2015F%
2014
-19.6% 197,913 219,244
-32.1% 54,981
55,858
-14.9% 142,931 163,386
-55.1% 76,891 112,849
-30.6% 36,519
62,501
-34.5% 36,519
66,662
-30.6%
9.20
15.74
72%
39%
7.5
75.0
55.0
75.0
%YoY
-9.7%
-1.6%
-12.5%
-31.9%
-41.6%
-45.2%
-41.6%
75%
51%
8.0
94.9
63.4
96.6
Cost of PTTEP’s Production
Source :PTTEP
Regional Petroleum Stock Recommendations
Company
JAPAN
INPEX CORP
JAPAN PETROLEUM
JX HD
CHINA
MIE HOLDINGS COR
CHINA PETROLEU-A
PETROCHINA CO-A
HONG KONG
SINOPEC CORP-H
CNOOC
PETROCHINA-H
INDIA
RELIANCE INDS
OIL & NATURAL GA
INDIAN OIL CORP
CAIRN INDIA
AUSTRALIA
ORIGIN ENERGY
SANTOS LTD
WOODSIDE PETRO
THAILAND
PTT PCL
PTT EXPL & PROD
AVERAGE
PBV
2015F
2016F
Key Risks
PER
2015F
2016F
REC./BB
Rating
Current
Price
Target Price
Upside
(%)
4.25
3.67
3.50
1508.0
4470.0
527.6
1559.6
4000.0
502.2
3.4%
-10.5%
-4.8%
0.8
0.6
0.7
0.8
0.6
0.7
26.2
7.3
-
26.2
12.5
9.1
3.40
3.20
2.88
0.9
8.3
13.7
0.8
6.4
10.1
-14.8%
-23.1%
-26.3%
0.6
1.5
2.1
0.7
1.4
2.0
24.5
44.5
17.7
29.6
3.36
3.34
3.23
7.3
13.1
10.0
6.7
12.0
9.4
-7.6%
-7.7%
-6.2%
1.1
1.2
1.2
1.0
1.1
1.2
20.0
20.2
25.7
13.4
11.4
15.9
4.65
4.36
4.17
3.09
850.0
306.3
349.9
211.2
1064.6
385.2
402.8
232.7
25.2%
25.8%
15.1%
10.2%
1.1
1.4
1.2
0.6
1.0
1.3
1.1
0.6
10.7
10.9
14.6
9.2
8.7
9.4
9.9
8.2
4.00
3.88
2.60
12.8
8.3
35.2
13.6
10.4
36.3
6.3%
25.2%
3.1%
1.0
0.9
1.5
1.0
0.9
1.5
21.0
24.9
22.8
16.3
13.1
18.8
BUY
BUY
356.0
117.0
402.5
140.0
13.1%
19.7%
1.4
1.2
1.1
1.2
1.1
1.1
10.0
12.7
16.1
8.5
9.5
12.2
Source :ASPS Research and Bloomberg
1)
Production from some projects may miss our
forecast and some plants might undergo unplanned
shutdown.
2) Dubai crude oil price may miss our forecast, so
PTTEP’s earnings might not reach our target.
3) Country risk.
Source :ASPS Research