In this briefing:
- MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed
- BCP: More Stable Income with an Attractive Yield
- Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US
1. MODEC: 17% Price Jump as Results Beat, Guidance Is Lowballed
Modec Inc (6269 JP) reported strong 2018 results as operations for the year went smoothly and gross margin recovered to double digits in the fourth quarter with the company also releasing its contingency reserves resulting in a large uptick in SPC related earnings below the operating line.
Results vs. Guidance | Results vs. Consensus | Results vs. Consensus High | Guidance vs. Consensus | ||
OP | +24% | +16% | +14% | -42% | |
Current Profit | +31% | +24% | +20% | -30% | |
NP | +46% | +33% | +19% | -32% |
Like last year however, guidance disappointed as the company released what we consider to be lowball estimates. Nevertheless, the stock reacted positively as the strong results offset some of the recent negativity from the large fall in crude prices. We examine the degree of conservatism we see in guidance below.
2. 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 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.
3. Exxon and Qatar Proceed with US$10bn Golden Pass LNG Terminal: Positive for Chiyoda and MDR US
Qatar Petroleum and Exxon Mobil (XOM US) have taken a positive final investment decision (FID) on the Golden Pass LNG export facility on the US Gulf Coast, one of 25 projects up for FID this year globally. Golden Pass awarded the engineering, procurement and construction (EPC) contracts for the project to a joint venture of Chiyoda Corp (6366 JP), Mcdermott Intl (MDR US) and Zachry Group, with the project expected to cost US$10bn and come on line in 2024. We discuss the company impacts, the project detail and market impacts
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
