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PTT
Public Company Limited
PTT <Bt44>
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Recommendation
New : BUY
Previous : BUY
Fair Value : Bt52.50
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Very
impressive 2002 earnings of Bt24,507mn
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PTT Plc. (PTT) reported very
strong and impressive 2002 earnings of Bt24,507mn (EPS
Bt8.8), up 14% yoy and above our previous estimate of
Bt23,020mn. The major factor driving the company's earnings
was operational improvement of subsidiary companies,
especially petrochemical businesses from surging
petrochemical prices in 2H02.
Average crude oil price rose
4.4% to $23.8/barrel while volume oil sales increased 2.3%
from 31,678 million litres to 32,404 million litres on the
back of rising domestic consumption. Meanwhile, natural gas
sales volume jump 8.1% yoy to 2,494 million cubic feet per
day (mmcfd) from 2,307mmcfd due mainly to higher gas
consumption from RATCH after the completion of its five
power plants.
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PTT income statement |
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Income Statement (Mn Bt) |
4Q02 |
3Q02 |
QOQ |
4Q01 |
YOY |
FY01 |
FY02 |
% |
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Sales |
112,173 |
104,806 |
7% |
88,118 |
27% |
377,902 |
399,752 |
6% |
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COGs |
100,222 |
88,729 |
13% |
71,613 |
40% |
322,388 |
345,053 |
7% |
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Gross profits |
11,951 |
16,076 |
(26%) |
16,505 |
(28%) |
55,514 |
54,699 |
(1%) |
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Gross margin (%) |
11% |
15% |
N.A. |
19% |
N.A. |
15% |
14% |
N.A. |
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SG&A |
6,028 |
2,893 |
108% |
3,749 |
61% |
11,395 |
14,114 |
24% |
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EBITDA |
15,687 |
15,889 |
(1%) |
12,421 |
26% |
49,840 |
57,545 |
15% |
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EBITDA margin (%) |
14% |
15% |
N.A. |
14% |
N.A. |
13% |
14% |
N.A. |
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Interest expense |
2,235 |
2,447 |
(9%) |
2,457 |
(9%) |
10,626 |
9,623 |
(9%) |
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Subsidiary contribution |
511 |
(669 ) |
N.A. |
383 |
34% |
(687 ) |
(2,766 ) |
302% |
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Net profit before extra item |
7,374 |
5,578 |
32% |
1,460 |
405% |
18,551 |
24,039 |
30% |
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Extra ordinary gain (loss) |
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- Forex gain (loss) |
(49 ) |
(1,184 ) |
(96%) |
1,583 |
N.A. |
3,014 |
468 |
(84%) |
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- Other (loss) |
0 |
0 |
N.A. |
0 |
N.A. |
0 |
0 |
N.A. |
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Net profit |
7,325 |
4,393 |
67% |
3,043 |
141% |
21,565 |
24,507 |
14% |
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EPS (Bt) before extra item |
2.64 |
1.99 |
32% |
0.52 |
405% |
6.63 |
8.59 |
30% |
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EPS (Bt) |
2.62 |
1.57 |
67% |
1.09 |
141% |
7.71 |
8.76 |
14% |
Contributions from subsidiaries rose 302%
from Bt687mn to Bt2,766mn, partly from forex gains. However, normalised
earnings of the subsidiaries, particularly TOC and ATC, recovered in 4Q02
as a result of rising petrochemical prices. For example, ATC posted a 4Q02
net profit of Bt362mn, compared to a Bt829mn loss in 4Q01. We expect both
TOC and ATC to show very strong earnings in 1Q03, helping to support PTT's
earnings.
The company has a strong financial position
with a gearing reduced from 1.6x last year to 1.2x. We expect gearing will
fall to 1x within 2004. In 2002, PTT could generate cash flow of
Bt30,035mn or Bt10.74/share. At the current share price, this represents
an attractive P/CF of only 4.1x. With its strong cash flow, PTT can afford
to pay out generous dividends. The company announced that it will pay a
dividend of Bt2.85 from 2002 earnings, representing a dividend yield of
6.5%.
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Earnings revision (Million Baht) |
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2002 |
2003F |
% |
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previous |
new |
change |
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Normalized earnings |
24,507 |
23,921 |
25,637 |
7% |
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EPS |
8.8 |
8.6 |
9.2 |
7% |
With a better-than-expected 2002 earnings,
we have revised our 2003 earnings up 7% to Bt25,637mn. Based on our new
earnings projections, PTT shares look very attractive on a 2003 PER of
4.8x and EV/EBITDA of 3.6x. Also, our target price based on our DCF
projection has increased from Bt49.50 to Bt52.50. With PTT shares trading
at a 16% discount to our new fair value, we reiterate our recommendation BUY.
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Earnings Summary |
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2000 |
2001 |
2002 |
2003F |
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Sales (Bt mn) |
371,455 |
377,902 |
399,752 |
412,945 |
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EBITDA (Bt mn) |
40,757 |
49,840 |
57,545 |
57,924 |
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Normalized earinings (Btmn) |
14,714 |
18,551 |
24,039 |
25,637 |
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Earnings (Btmn) |
12,280 |
21,565 |
24,507 |
25,637 |
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EPS (Bt) |
4.4 |
7.7 |
8.8 |
9.2 |
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PER (x) |
10.0 |
5.7 |
5.0 |
4.8 |
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EV/EBITDA |
5.9 |
4.3 |
3.8 |
3.6 |
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Free cash flow (Btmn) |
(180) |
(26,250) |
20,183 |
15,037 |
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CF/share (Bt) |
6.7 |
7.5 |
10.7 |
12.0 |
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Book value per share (Bt) |
10.9 |
20.7 |
29.0 |
35.7 |
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DPS (Bt) |
- |
3.0 |
2.85 |
3.0 |
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Dividend yield (%) |
- |
5.7 |
6.5 |
6.8 |
- PTT's oil businesses contributed 67% of
the company's total revenues last year, aided by a 4.4% increase in
global crude oil prices and a 2.3% increase in volume oil sales.
Furthermore, the company benefited from a stock gain of Bt1,228mn.
EBITDA for these businesses rose 11% yoy to Bt6,369mn.
Although natural gas sales volume rose 8.1%
yoy and total gas products (LPG, ethane, propane and natural gas liquids)
from separation plants increased by a slight 1.1%, it was not enough to
offset the impact from LPG prices falling 6.5% from $260/tonne to
$243/tonne. Hence, EBITDA for this business was down 1.7% yoy to
Bt24,113mn.
PTT's 63%-owned subsidiary, PTTEP, recorded
petroleum volume sales growth of 11% yoy to 101,736 barrel of oil
equivalent per day. PTTEP contributed EBITDA of Bt22,211mn, up 4.8% yoy.
We expect PTTEP will show earnings growth of 5% this year due to
increasing petroleum selling prices and gas sales volume.
- PTT's petrochemical businesses should also
show further recovery this year with the industry's peak cycle occurring
earlier than forecast, especially aromatic products. This is due to the
rising crude oil prices and shortage of aromatic supply from rising
demand from SM and PTA producers. We expect TOC and ATC to post very
strong earnings this year.
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