Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

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Thai Equity - Bottom-up - Equities

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Pi Securities PCL, Thailand

Pi Securities is a well known securities company with 40 years experience in the industry, serving more than 60,000 clients. We offer one - stop service providing full range of financial products and services including extensive Brokerage, Proprietary Trading (Equities and Bonds), Advisory Services, Structured Products.

Moreover, our new research team tailored for institutional clients to focus on mid to small cap of Thai equities and trading strategies. Our services offered to our premium clients also include arrangement of company or site visits to with the managements of Thai listed companies.

Note: Effective on 1 March 2022, Country Group Securities PCL changed its name to Pi Securities

Equity Bottom-Up

<p><strong>Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume growth and improve GPM  beginning 2021.</strong></p><div>• Expect 1Q21 earnings to soften YoY mainly due to decline in average selling price. While improve Q0Q as there will be no significant losses from financial instrument and asset impairment compared to 4Q20.</div><div></div><div>• The Oman Block 61 gas project is anticipated to be the new growth driver for PTTEP given 1) Increase in volume sales by 10% 2)  higher EBITDA margin, and 3)substantial reserve addition (0.5 to 1 year).</div><div></div><div>• Bright 2021 earnings outlook as the new investment in Oman will increase the volume sales to 398 kBOED (+12% YoY, and 6% higher than previous guidance of 375 kBOED) and improving GPM from lower unit cost (-6% YoY)</div><p></p><p><strong>We maintain our BUY  recommendation, while revise up the target price to Bt131 (from previous Bt125) on the back of the earnings revision incorporating Oman Block 61 project. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16x PE’21.</strong></p>

Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume growth and improve GPM  beginning 2021.• Expect 1Q21 earnings to soften YoY mainly due to decline in average selling price. While improve Q0Q as there will be no significant losses from financial instrument and asset impairment compared to 4Q20.• The Oman Block 61 gas project is anticipated to be the new growth driver for PTTEP given 1) Increase in volume sales by 10% 2)  higher EBITDA margin, and 3)substantial reserve addition (0.5 to 1 year).• Bright 2021 earnings outlook as the new investment in Oman will increase the volume sales to 398 kBOED (+12% YoY, and 6% higher than previous guidance of 375 kBOED) and improving GPM from lower unit cost (-6% YoY)We maintain our BUY  recommendation, while revise up the target price to Bt131 (from previous Bt125) on the back of the earnings revision incorporating Oman Block 61 project. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16x PE’21.

PTTEP: Oman Block 61 Gas Project to Be New Growth Driver

Thematic (Sector/Industry)

<p><strong>Crude: Bright E&amp;P business performance from recovering crude price</strong></p><ul><li>We expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021. <strong> PTTEP is our top pick</strong>, the E&amp;P business will most benefit from recovering crude price.</li></ul><p><strong>Refinery: Improving product demand to drive GRM</strong></p><ul><li>Thai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). <strong>TOP is our top pick </strong>among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).</li></ul><p><strong>Petrochemicals: Benefit from global recovery</strong></p><ul><li>We foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). <strong>PTTGC is our top pick</strong> as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.</li></ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/642/original/SMK1.png?1611645077" class="editor-image img-responsive" data-smartkarma-image-id="184642"></figure><p style="text-align: center;"><strong>Valuation Summary*</strong></p>
<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/184/643/original/Picture1.jpg?1611645252" class="editor-image img-responsive" data-smartkarma-image-id="184643"></figure></section><p style="text-align: center;"><em>Source: CGS Research, Company data, SET</em></p></section>

Crude: Bright E&amp;P business performance from recovering crude priceWe expect the widespread deployment of COVID-19 vaccines, continued support from OPEC+ on regulating the crude supply, and post COVID-19 demand spike in crude products (Jet fuel, gasoline, diesel etc.) will support the Brent crude to continue the upward rally in 2021.  PTTEP is our top pick, the E&amp;P business will most benefit from recovering crude price.Refinery: Improving product demand to drive GRMThai refiners’ share prices are trading at 10-to-20% discount to their historical PBV multiples mainly due to the COVID-19 impact, which dragged the GRM to negative territory along with huge inventory loss. We have a positive view on 2021 refinery performance and expect the GRM to gradually pick up each quarter on the back of recovering products spreads (especially Jet fuel). TOP is our top pick among refineries considering the cheap valuation (0.9x PBV’21, 20% below its 5 year trading average), and upside from current share price (+18%).Petrochemicals: Benefit from global recoveryWe foresee a strong recovery in petrochemicals to continue in 1H21. Olefins (HDPE, PP) has already recovered back to its 5-year average ahead of Chinese New Year. Meanwhile, aromatics (PX, BZ) to be supported by growth in textile and automotive industry and new capacity in downstream products (PTA). PTTGC is our top pick as overall businesses benefit from petrochemical upswing. The company will also realize 10% more capacity in PO/Polyols unit by 1Q21.Valuation Summary*
Source: CGS Research, Company data, SET

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

<p><strong>The stock outperformed the SET index by +15% in last two months on the back of recovering crude price, and surpassed our previous target price of Bt108. We expect PTTEP to continue the rally as the reference Dubai crude price is anticipated to average at 55 US$/BBL in 2021 (+30 YoY).</strong></p><div>• Expect weak 4Q20 earnings of Bt5.5bn (-53% YoY, -23% QoQ) on the back of lower average selling price (ASP) and hedging loss.</div><div></div><div>• Expect a 22% EPS growth in 2021E from improving volume sales and recovering crude price.</div><div></div><div>• Expect Brent crude’s upward rally in 2021 backed by production cut of OPEC+ and widespread vaccine deployment.</div><p></p><p><strong>We maintain our BUY  recommendation, while revise up the target price to Bt125 (from previous Bt108) on the back of the earnings revision. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16.5x PE’21.</strong></p>

The stock outperformed the SET index by +15% in last two months on the back of recovering crude price, and surpassed our previous target price of Bt108. We expect PTTEP to continue the rally as the reference Dubai crude price is anticipated to average at 55 US$/BBL in 2021 (+30 YoY).• Expect weak 4Q20 earnings of Bt5.5bn (-53% YoY, -23% QoQ) on the back of lower average selling price (ASP) and hedging loss.• Expect a 22% EPS growth in 2021E from improving volume sales and recovering crude price.• Expect Brent crude’s upward rally in 2021 backed by production cut of OPEC+ and widespread vaccine deployment.We maintain our BUY  recommendation, while revise up the target price to Bt125 (from previous Bt108) on the back of the earnings revision. Our valuation is derived using DCF methodology (WACC 9.4%, TG 2%), implying 16.5x PE’21.

PTTEP: Bright 2021 Earnings Outlook from Recovering Crude Price

<p><strong>Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years. The company rolled out 5-year investment plan allocating US$23.6bn aiming long term growth.</strong></p><div>• PTTEP rolled out an investment plan of US$23.6bn (US$14.0bn CAPEX and US$8.7bn OPEX) to maintain the production from existing projects and accelerating key development projects aiming long term growth.</div><div></div><div>• The company foresee  decommissioning expense of US$686m in 2022 on developing G1/61 (Erawan)and G2/61 (Bangkot)projects. Though this will only impacts the cash outflow but not the earnings, on a worst case scenario we estimate the impact to our target price is Bt4.5/sh (4.0% of our DCF based TP).</div><p></p><p>Given a minimal impact to our earnings forecast (&lt;3.0%) from sales volume adjustment, we maintain target price and  BUY recommendation. Our target price of Bt108.0 is derived using DCF methodology  (WACC 9.5% and TG 2%). Our valuation implies 13.2x PE’21</p>

Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years. The company rolled out 5-year investment plan allocating US$23.6bn aiming long term growth.• PTTEP rolled out an investment plan of US$23.6bn (US$14.0bn CAPEX and US$8.7bn OPEX) to maintain the production from existing projects and accelerating key development projects aiming long term growth.• The company foresee  decommissioning expense of US$686m in 2022 on developing G1/61 (Erawan)and G2/61 (Bangkot)projects. Though this will only impacts the cash outflow but not the earnings, on a worst case scenario we estimate the impact to our target price is Bt4.5/sh (4.0% of our DCF based TP).Given a minimal impact to our earnings forecast (&lt;3.0%) from sales volume adjustment, we maintain target price and  BUY recommendation. Our target price of Bt108.0 is derived using DCF methodology  (WACC 9.5% and TG 2%). Our valuation implies 13.2x PE’21

PTTEP: Target to Achieve 6% CAGR Sales Growth in 2021-25

<p><strong>Yesterday analyst meeting came out in a neutral tone. We maintain our BUY  recommendation based on a target price of Bt108 derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.</strong></p><ul>
<li>PTTEP reported 3Q20 net profit of Bt7.2bn (-35%YoY, +67%QoQ), improving QoQ on the back of increased volume sales and average selling price (ASP).</li>
<li>Expect 4Q20 earnings to soften both YoY and QoQ , due to drop in ASP as the gas price is expected to decline by 13% to US$5.4/MMBTU (from 6.2 US/MMBTU in 3Q20)</li>
<li>We expect a 10% downside risk in our earnings forecast for 2021-22 period, as we anticipate  8 to 10% drop in PTTEP’s volume sales (from previous guidance) due to global oil demand destruction amid COVID-19 induced economic slowdown.</li>
<li>Thus we recommend trading and gradually accumulate the stock beginning 1Q21.</li>
</ul>

Yesterday analyst meeting came out in a neutral tone. We maintain our BUY  recommendation based on a target price of Bt108 derived from DCF methodology (WACC 9.5% and TG 2%). Our valuation implies 13.3x PE’21.
PTTEP reported 3Q20 net profit of Bt7.2bn (-35%YoY, +67%QoQ), improving QoQ on the back of increased volume sales and average selling price (ASP).
Expect 4Q20 earnings to soften both YoY and QoQ , due to drop in ASP as the gas price is expected to decline by 13% to US$5.4/MMBTU (from 6.2 US/MMBTU in 3Q20)
We expect a 10% downside risk in our earnings forecast for 2021-22 period, as we anticipate  8 to 10% drop in PTTEP’s volume sales (from previous guidance) due to global oil demand destruction amid COVID-19 induced economic slowdown.
Thus we recommend trading and gradually accumulate the stock beginning 1Q21.


PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales

Thailand

PTT Exploration and Production Public Company Limited explores for crude oil and natural gas, develops fields for production, and produces oil and natural gas. The Company is a subsidiary of the Petroleum Authority of Thailand.

PTT Exploration & Production P (PTTEP-R TB)

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PTT Exploration & Production P (PTTEP-R TB)

PTTEP: Oman Block 61 Gas Project to Be New Growth Driver

Yesterday analyst meeting came out in positive tone. We see the acquisition of 20% stake in Oman block 61 gas project will aid PTTEP’s sales volume...

Pi Securities PCL, Thailand

Energy Sector : Overweight- Oil Demand Recovery to Drive 2021 Earnings

Energy Sector : Overweight- Oil demand recovery to drive 2021 earnings. We expect bright E&P business performance from recovering crude price, and...

Pi Securities PCL, Thailand

PTTEP: Bright 2021 Earnings Outlook from Recovering Crude Price

The stock outperformed the SET index by +15% in last two months on the back of recovering crude price, and surpassed our previous target price of...

Pi Securities PCL, Thailand

PTTEP: Target to Achieve 6% CAGR Sales Growth in 2021-25

Amid the COVID-19 crisis and facing a hard hit from crude price downfall PTTEP targets petroleum sales growth at 6% CAGR in next 5 years.

Pi Securities PCL, Thailand

PTTEP: 4Q20 Earnings to Soften from Lower ASP and Volume Sales

Yesterday analyst meeting came out in a neutral tone. 4Q20 earnings to soften from lower ASP and volume sales. We maintain our BUY ...

Pi Securities PCL, Thailand

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