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

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

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

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

Equity Bottom-Up

<p>We initiate coverage of TOP with a BUY rating, based on a 2021E target price of Bt65.0, pegged to 1.1xPBV,21E, which is in line with its world peers and a 10% discount to its Thailand peers.</p><p>The story:</p><div>• Earnings upcycle in 2021E after turnaround from COVID-19 impact</div><div>• Refinery segment recovery on track</div><div>• Operational excellence from CFP upgradation</div><div>• Slightly positive view on petrochemicals, neutral on power business</div><p></p><p>Risks:</p><div>• Raw material price fluctuation</div><div>• Foreign currency exchange rate fluctuation</div>

We initiate coverage of TOP with a BUY rating, based on a 2021E target price of Bt65.0, pegged to 1.1xPBV,21E, which is in line with its world peers and a 10% discount to its Thailand peers.The story:• Earnings upcycle in 2021E after turnaround from COVID-19 impact• Refinery segment recovery on track• Operational excellence from CFP upgradation• Slightly positive view on petrochemicals, neutral on power businessRisks:• Raw material price fluctuation• Foreign currency exchange rate fluctuation

TOP: Premier Thai Refinery to Post Huge Earnings Turnaround in 2021E

Star Petroleum Refining / Equity Bottom-Up

<p>We revise down company’s earning to the loss of Bt956m in 2020E and also trim our target price by 50% to Bt5.7 (from Bt11.6), derived from 0.8xPBV’20E which is -2SD to its 5 year average. We maintain a ‘BUY’ recommendation as we believe current valuation is quite cheap.</p><p>The story:</p><div>• Revise earnings down as refinery margin collapse</div><div>• Petroleum consumption remain weak in 2Q20E</div><div>• Strong balance sheet, compared to peers</div>

We revise down company’s earning to the loss of Bt956m in 2020E and also trim our target price by 50% to Bt5.7 (from Bt11.6), derived from 0.8xPBV’20E which is -2SD to its 5 year average. We maintain a ‘BUY’ recommendation as we believe current valuation is quite cheap.The story:• Revise earnings down as refinery margin collapse• Petroleum consumption remain weak in 2Q20E• Strong balance sheet, compared to peers

<p><strong>Yesterday analysts meeting came out with a positive tone. We maintain our BUY rating and a target price of Bt33 based on SOTP, implying to 1xPBV’20E.</strong></p><p><strong>Key takeaway:</strong></p><ul>
<li>Expect 4Q19 earnings to grow YoY and QoQ backed by a recovery in refinery business.</li>
<li><span>Trimmed 2019E earnings forecast by 33% to factor in higher stock loss than expectation.</span></li>
<li>We forecast 2020E earnings to grow 87%YoY and maintain our positive view toward its 2019-2021 earnings backed by better demand outlook derived from IMO regulation applied in Jan 2020 and 17% capacity expansion by 2021.</li>
</ul><p><strong>Upside risk:</strong> An IPO of Saudi Aramco in December might have positive sentiment toward crude price which could have low pressure to its stock loss.</p><p><strong>Background:</strong> Established in 1940, Bangchak Corporation Public Company Limited and its subsidiaries ‘ operations include refinery, oil trading, petroleum product marketing and renewable energy businesses. With a capacity of 120,000 barrels per day, Bangchak produces and distributes its products through more than 1,000 service stations nationwide. It also plans to expand the scope of its business to cover food and convenience stores and novel product businesses and to seek investment opportunities in bio-based products and natural resource businesses.</p>

Yesterday analysts meeting came out with a positive tone. We maintain our BUY rating and a target price of Bt33 based on SOTP, implying to 1xPBV’20E.Key takeaway:
Expect 4Q19 earnings to grow YoY and QoQ backed by a recovery in refinery business.
Trimmed 2019E earnings forecast by 33% to factor in higher stock loss than expectation.
We forecast 2020E earnings to grow 87%YoY and maintain our positive view toward its 2019-2021 earnings backed by better demand outlook derived from IMO regulation applied in Jan 2020 and 17% capacity expansion by 2021.
Upside risk: An IPO of Saudi Aramco in December might have positive sentiment toward crude price which could have low pressure to its stock loss.Background: Established in 1940, Bangchak Corporation Public Company Limited and its subsidiaries ‘ operations include refinery, oil trading, petroleum product marketing and renewable energy businesses. With a capacity of 120,000 barrels per day, Bangchak produces and distributes its products through more than 1,000 service stations nationwide. It also plans to expand the scope of its business to cover food and convenience stores and novel product businesses and to seek investment opportunities in bio-based products and natural resource businesses.

BCP: Better Refinery Outlook in 4Q19 and Beyond

<p><strong>We initiate coverage of BCP with a BUY rating, based on a target price of Bt41, which is derived from a sum-of-the-parts (SOTP) methodology and imply to 10.2xPE’19E to bring it in line with the Thai energy sector. </strong></p>
<p><strong> </strong><strong>The story:</strong></p>
<ul>
<li>Attractive dividend yield of 6-7% a year</li>
<li>Refining business set to recover in 2019</li>
<li>Hidden value from non-core business</li>
</ul>
<p><strong>Risks:</strong></p>
<ul>
<li>Raw material price fluctuation</li>
<li>Possibility of impairment losses from investment projects</li>
</ul>
<p><strong>Background: </strong>Established in 1940, Bangchak Corporation Public Company Limited and its subsidiaries ‘ operations include refinery, oil trading, petroleum product marketing and renewable energy businesses. With a capacity of 120,000 barrels per day, Bangchak produces and distributes its products through more than 1,000 service stations nationwide. It also plans to expand the scope of its business to cover food and convenience stores and novel product businesses and to seek investment opportunities in bio-based products and natural resource businesses.</p>

We initiate coverage of BCP with a BUY rating, based on a target price of Bt41, which is derived from a sum-of-the-parts (SOTP) methodology and imply to 10.2xPE’19E to bring it in line with the Thai energy sector. 
 The story:

Attractive dividend yield of 6-7% a year
Refining business set to recover in 2019
Hidden value from non-core business

Risks:

Raw material price fluctuation
Possibility of impairment losses from investment projects

Background: Established in 1940, Bangchak Corporation Public Company Limited and its subsidiaries ‘ operations include refinery, oil trading, petroleum product marketing and renewable energy businesses. With a capacity of 120,000 barrels per day, Bangchak produces and distributes its products through more than 1,000 service stations nationwide. It also plans to expand the scope of its business to cover food and convenience stores and novel product businesses and to seek investment opportunities in bio-based products and natural resource businesses.

BCP: More Stable Income with an Attractive Yield

Thailand

Thai Oil Public Company Limited is an oil refinery company. The Company imports crude oil and refines it into gasoline.  It also produces oil related products including liquefied petroleum gas (LPG), kerosene, fuel oil and chemicals. Thai oil supplies its products to domestic market where its major customers include Shell, Caltex Oil and the Petroleum Authority of Thailand.

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Thai Oil (TOP-R TB)

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

TOP: Premier Thai Refinery to Post Huge Earnings Turnaround in 2021E

We initiate coverage of TOP with a BUY rating, based on a 2021E target price of Bt65.0, pegged to 1.1xPBV,21E, which is in line with its world...

Pi Securities PCL, Thailand

SPRC: A Harsh Year for Refineries

We revise down company’s earning to the loss of Bt956m in 2020E and also trim our target price by 50% to Bt5.7 (from Bt11.6), derived from...

Pi Securities PCL, Thailand

BCP: Better Refinery Outlook in 4Q19 and Beyond

Yesterday analysts meeting came out with a positive tone. We maintain our BUY rating and a target price of Bt33 based on SOTP, implying to...

Pi Securities PCL, Thailand

BCP: More Stable Income with an Attractive Yield

We initiate coverage of BCP with a BUY rating, based on a target price of Bt41, which is derived from a sum-of-the-parts (SOTP) methodology and...

Pi Securities PCL, Thailand

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