Thanachart Securities

Transcription

1 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 Current Market Net Trade SET Index vs MSCI Asia x JP Market data Close % Δ Net Trade (Bt bn) Prev. -1M YTD (index) SET index (LHS) (index) SET Index 1, % Foreign ,9 MSCI Asia x JP (RHS) 8 Turnover (Bt m) 52, % Retail ,8 7 Mkt Cap (Bt bn) 16, % Institutes ,7 Stock Gainers 375 stocks Proprietary ,6 6 Stock Losers 999 stocks 1,5 5 Note: Data for SET Market only 1,4 4 Jan-17 Aug-17 Mar-18 Oct-18 Thanachart Securities TOP STORY CKP (BUY) New earnings cycle on the way We see CKP entering a new earnings cycle in 22F after its 1.3GW Xayaburi hydropower project runs for a full year; we project CKP s earnings to grow 127%. A short-term catalyst will likely be continued strong y-y normalized profit for the next three quarters from NN2 its current main hydropower project before Xayaburi starts up. BUY. PTTEP (HOLD) Winner s curse P.3 PTTEP awarded Bongkot and Erawan concession renewals New PSC-based schemes effective from Earnings could decline by $15m vs existing Bongkot concession Potential downside risk to our TP Market Valuation Market data 218F 219F 22F PE (x) Norm EPS growth (%) EV/EBITDA (x) P/BV (x) Yield (%) ROE (%) Net D/E (x) Major Indices Close Δ % Δ Dow Jones 24, % NASDAQ 7, % FTSE 6, % SHCOMP (China) 2, % Hang Seng 26, % FTSSI (Singapore) 3, % KOSPI 2, % JCI (Indonesia) 6, % MSCI Asia % MSCI Asia x JP % Currency /Bond data Close Δ % Δ Dollar index % Bt/US$ % 1JPY/US$ % 1Y bond yield (TH) % 1Y treasury yield (US) % Commodities Close Δ % Δ NYMEX (US$/bbl) % BRENT (ICE) (US$/bbl) % DUBAI (US$/bbl) % Baltic Dry Index 1, % Baltic Supramax Index % GRM (US$/bbl) % Gold (US$/oz) 1, % Coal (Newcastle)* % (US$/tonne)* (US$ cent/lb)** HDPE-Naphtha % Ethylene-Naphtha % PX-Naphtha % BZ-Naphtha % Steel-HRC 755..% Rubber SICOM TSR2 1, % Rubber TOCOM 1, % Raw Sugar** % White Sugar** % Source: Thanachart, Bloomberg Please note that due to the interest of timeliness, this product was not edited.

2 BUY (Unchanged) TP: Bt 5.8 (From: Bt 5.6 ) Change in Numbers Upside : 12.6% 13 DECEMBER 218 CK Power Pcl (CKP TB) New earnings cycle on the way Thanachart Securities We see CKP entering a new earnings cycle in 22F after its 1.3GW Xayaburi hydropower project runs for a full year; we project CKP s earnings to grow 127%. A short-term catalyst will likely be continued strong y-y normalized profit for the next three quarters from NN2 its current main hydropower project before Xayaburi starts up. BUY. Lifting our TP to Bt5.8/share We reaffirm our BUY rating on CKP with a new SOTP-based 12- month TP of Bt5.8/share (from Bt5.6), using DCF (219F base year). We also raise our normalized earnings for F by 7-26%, largely as we anticipate robust normalized profit from its 42%-net equity owned.6gw Nam Ngum 2 (NN2) hydropower plant in Laos. We see CKP as a high growth stock with a new earnings cycle starting in 22F when its 37.5%-owned 1.3GW Xayaburi hydropower project (due to come on stream in October 219) runs for a full year and boosts 22F normalized earnings (+127% yoy), on our estimate. By 22F we look for ROE and FCF to rise respectively by 4.2pp and 57% (from 218F levels), and for net gearing to fall to.6x. We leave expansion potential as upside. NN2 strong earnings growth y-y to 2Q19F NN2 reported very strong earnings in 3Q18, even better than we had expected, on excess power generation in September (sold under the Excess Energy portion) given huge water inflows to the catchment area this year. CKP has declared power sales of 587GWh for 4Q18, a 42% y-y increase. We expect strong 4Q18 normalized earnings of 247% y-y (128% in 3Q18). Given high water levels in its reservoir and stronger y-y water inflows in 4Q18 so far, we also expect NN2 to boost CKP s all-in normalized profit growth y-y in 1H19 despite its 65%-owned Bangpa-in Cogeneration Co (BIC) plants undergoing planned maintenance shutdowns in June. Note that NN2 s major costs comprise depreciation and interest expenses while its tariff is due to rise by 8% from 219 as per the power purchase agreement (PPA). Xayaburi bringing a new earnings cycle Construction of Xayaburi was 96% complete at end 3Q18 and management expects commercial operation on 1 October 219, as planned. Given that Xayaburi is a run-of-the-river project, this reduces the water management ability. Yet, our model assumes 93% of the annual supply target contract for the first five years and an estimated EiRR of 9.6%. We project Xayaburi (Bt3.44/sh of our SOTP) to contribute earnings of Bt.8bn-1.1bn p.a. to CKP during 22-21F, lifting CKP s normalized profit to a new base. Expansion potential CKP is studying whether to become involved in a large-sized hydropower project in Laos, which is targeted to sell power to Thailand. We believe Thailand s new Power Development Plan, which is widely expected to be released in early 219, to provide expansion opportunities for private operators, including increases in power bought from neighboring countries. We expect some progress to be made with CKP s study project next year. COMPANY VALUATION SUPANNA SUWANKIRD supanna.suw@thanachartsec.co.th Y/E Dec (Bt m) 217A 218F 219F 22F Sales 6,879 8,85 8,785 9,133 Net profit ,494 Consensus NP ,657 Diff frm cons (%) 17.6 (21.9) (9.9) Norm profit ,494 Prev. Norm profit ,492 Chg frm prev (%) Norm EPS (Bt) Norm EPS grw (%) (53.7) Norm PE (x) EV/EBITDA (x) P/BV (x) Div yield (%) ROE (%) Net D/E (%) PRICE PERFORMANCE (Bt/shr) CKP Rel to SET Index (%) (1) 2. (2) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 COMPANY INFORMATION Price as of 13-Dec-18 (Bt) 5.15 Market Cap (US$ m) 1,16.4 Listed Shares (m shares) 7,37. Free Float (%) 27.9 Avg Daily Turnover (US$ m) M Price H/L (Bt) 5.45/3.6 Sector Utilities Major Shareholder CK 3.25% Sources: Bloomberg, Company data, Thanachart estimates Please see the important notice on the back page

3 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 PTT Exploration &Production Pcl (PTTEP TB) - HOLD Chak Reungsinpinya chak.reu@thanachartsec.co.th News Update Winner s curse PTTEP awarded Bongkot and Erawan concession renewals New PSC-based schemes effective from Earnings could decline by $15m vs existing Bongkot concession Potential downside risk to our TP PTTEP has been awarded concession renewals for both Bongkot and Erawan fields, effective We have already included Bt27/sh for Bongkot concession renewal in our TP of Bt133 but given the much lower-than-expected gas price that PTTEP has committed to in the new schemes, we now see potential downside risks to our TP. Ownership recap: PTTEP s stake in the renewed Bongkot concession will increase to 1% in 222 (Bongkot) and 223 (Bongkot South) from 66.67% currently. Its ownership in Erawan will be 6% once the new concession takes effect (222) with Mubadala Petroleum holding the other 4%. Chevron, which is the current concessionaire in Erawan field, will not be involved in the new concession. PTTEP s reported sales volume to increase marginally: We estimate PTTEP s reported sales volume of both Bongkot and Erawan fields post 223 will be about 148 KBOED, or about 35 KBOED higher than its reported volume from existing Bongkot ownership. This is due to the following: - Lower off-take volume: Erawan will likely see its off-take volume lowered to 8mmcfd post 222 compared to 13mmcfd currently. Both Bongkot and Bongkot South will see their combined output falling to 7mmcfd for the new contract vs 87mmcfd currently. - PSC accounting: Because the new contracts will be booked under production-sharing contract (PSC) scheme, PTTEP will only get to record its entitlement volume which includes 5% cost recovery plus its share of profit split. Net, producer s entitlement will be 62% for Bongkot and 62.8% for Erawan. Key Valuations Y/E Dec (Bt m) F 219F 22F Revenue 147, , , ,817 Net profit 2,579 43,31 47,987 41,77 Norm net profit 28,382 43,31 47,987 41,77 Norm EPS (Bt) Norm EPS gr (%) (13.1) Norm PE (x) EV/EBITDA (x) P/BV (x) Div. yield (%) ROE (%) Net D/E (%) (1.5) (5.1) Source: Thanachart estimates Stock Data Closing price (Bt) 125. Target price (Bt) 133. Market cap (US$ m) 15,167 Avg daily turnover (US$ m) M H/L price (Bt) 16./93.5 Price Performance (Bt/shr) PTTEP (%) 2 Rel to SET Index Dec-17 Apr-18 Aug-18 Dec-18 - PTTEP s increased ownership: PTTEP s stake in Bongkot field will increase to 1% from 66.67% currently whereas its participation in Erawan will increase to 6% from zero. Pricing a key drag: PTTEP has bid quite aggressively and its committed gas selling price will likely be 28-45% lower than prevailing ASP of Bongkot and Erawan. The reference gas price is Bt116/MMBTU for the new contracts compared to Bt165/MMBTU for Erawan and Bt214/MMBTU for Bongkot in the current concessions. This reference price will be adjusted according to Dubai oil price, economic index and exchange rate. As of October 218, Bongkot and Bongkot South wellhead prices are about 7. and 8.7 $/mmbtu, respectively, whereas Erawan wellhead price is about $5.8/mmbtu. Based on these prices, we estimate pro-forma price under the new contract to be about $4.2/MMBTU across both fields. Management guides for gas ASP in the range of $4-5/MMBTU for Dubai oil price of $6-7/bbl. THANACHART SECURITIES 3

4 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 Returns dependent on cost reduction: management cites that it expects to be able to reduce unit production cost by about 2-25% compared to current levels. Synergies could come from efficient drilling activities, standardized WHP, logistics and decommissioning activities. Our pro-forma earnings estimate: Based on these parameters, we estimate PTTEP s pro-forma earnings under the new Bongkot and Erawan contracts to be as much as US$15m lower than the existing Bongkot contract at prevailing market prices (Gas ASP as stated above and liquid ASP at $6/BOE) and assuming 25% unit cost reduction. Ex 1: Pro-forma Earnings Of New (From 222/23) vs. Current Contracts Unit Current (concession) New (PSC) New vs current Bongkot Bongkot Erawan Total Ownership % 66.67% 1.% 6.% Royalties % 12.5% 1.% 1.% Cost recovery % N/A 5.% 5.% Producer entitlement % N/A 3.% 32.% Producer's entitlement % 1.% 62.% 62.8% PTTEP's reported sales volume % 66.67% 62.% 37.68% Production and sales volumes Gas MMCFD Condensate KBOED Total production volume KBOED Producer's entitlement volume KBOED PTTEP's reported sales volume KBOED Average selling price (ASP) Gas ASP US$/MMBTU Liquid ASP US$/BOE Blended ASP US$/BOE PTTEP's reported revenue US$ m 1, ,682. (38.9) Costs Production cost ex. royalties US$/BOE Royalties US$/BOE 6. Cost per unit of production US$/BOE Reported cost per unit of sales US$/BOE PTTEP's reported cost US$ m 1, , Pre-tax profit US$ m (531.6) Tax US$ m (38.7) Net profit US$ m (15.9) Sources: Company data, Thanachart estimates THANACHART SECURITIES 4

5 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 NEWS CLIPPING EC says welfare cash not a ruse for election : Critics see it as a regime ploy for PPRP to gain edge. The Election Commission (EC) has leapt to the defence of the state welfare scheme for low-income earners, criticised as a populist policy and a thinly veiled attempt to support a pro-regime party's campaign ahead of the Feb 24 poll. NLA passes bill to increase severance pay : The National Legislative Assembly (NLA) has passed an amendment to the labour protection law, giving workers laid off after 2 years of service the equivalent of 4 days of pay. The new rate is expected to come into force by January or early February next year. FPO proposes debt test to screen welfare smartcard recipients : The Fiscal Policy Office (FPO) has floated the idea of adding debt burden to the criteria in screening recipients for the government's welfare and subsidy scheme for the poor in an effort to weed out cheats. Bt7bn boost for Northeast backed : Five upper isaan provinces targeted for development initiatives aimed at improving livelihoods in the region. FIVE provinces in the upper-northeast region have been given the go-ahead on plans for projects worth a combined Bt7 billion that will take in the development of an improved logistics system and better water resources management for agriculture and flood prevention, along with upgrades to manufacturing capabilities. Trade war fallout hastens efforts to deliver deal on mega-trade pact : Thailand is determined to help bring about an agreement by the end of next year for the Regional Comprehensive Economic Partnership (RCEP) to proceed as a counterbalance to the impact of the trade war between the US and China. PTTEP wins rights to two gas blocks : Chevron to part from Erawan after 41 years. The foothold of Chevron Thailand Exploration and Production, the country's first petroleum explorer, will become far smaller in the next few years after the government awarded 1-year concession rights to operate the country's largest gas block, Erawan, to PTT Exploration and Production Plc (PTTEP). PTTEP wins bid for two gas fields : SET-listed energy firm PTT Exploration and Production (PTTEP) Plc has won the bid to explore and produce petroleum in both Bongkot and Erawan blocks in the Gulf of Thailand. Scant few eligible for VAT return scheme : A meagre 36, of the 11.4 million recipients of the government's welfare and subsidy scheme for the poor are entitled to value-added tax (VAT) payback in the first month after the tax incentive scheme started last month. The Nation The Nation THANACHART SECURITIES 5

6 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 Market data Close Δ % Δ PRICE CHANGE - MOST ACTIVE SET Index 1, % Change 1 Day (%) Change 1 Week (%) SET5 Index 1, % SET1 Index 2, % MAI Index % Economic data Current -1M -3M BDMS SCB CPALL KBANK PT TGC BBL CPALL BEM BDMS KBANK Saving Rate (%) Fixed Deposit - 3M (%) Fixed Deposit - 1Y (%) Govt Bond Yield 1Y (%) Govt Bond Yield 1Y (%) Treasury Yield 1Y (%) Policy Rate (%) VIX Index TED Spread (%) , Thai BMA PT T AO T ADVANC PT TGC SCC PT T TOP ADVANC PT TEP PT TEP (8) (6) (4) (2) 2 4 (15) (1) (5) Change 1Month (%) Change Year-To-Date (%) BDMS PT TEP CPALL PT T PT TGC IVL PT T AO T SET Forward PE Band AO T SCC CPALL PT TGC (index) 3, 2,5 2, 1,5 1, 5 25x 21x 17x 13x 9x 6x PT TEP EA KBANK SCC ADVANC BANPU BEAUTY KBANK (2) (15) (1) (5) 5 1 (3) (2) (1) SECTOR CHANGE Change 1 Day (%) Change 1 Week (%) F 22F SET PE Discount to MSCI Asia x JP (x) STD = 6.7x STD = 3.8x Average =.9x (2) (4) -1 STD = -2x -2 STD = -4.9x (6) (8) Jan-3 Oct-6 Jul-1 Apr-14 Jan-18 HELTH HELTH BA NK COMM COMM BA NK ETRON ETRON AUTO AUTO FOOD MEDIA PROP FOOD SET PROP TRANS TRANS MEDIA SET ICT ICT PE TRO CONMAT CONMAT PE TRO ENERG ENERG (4.) (3.) (2.) (1.). 1. (8.) (6.) (4.) (2.). Change 1 Month (%) Change Year-To-Date (%) HELTH HELTH COMM ENERG ETRON TRANS BA NK BA NK PE TRO PE TRO MEDIA SET TRANS COMM FOOD PROP SET ICT ENERG CONMAT CONMAT ETRON PROP AUTO ICT FOOD AUTO MEDIA (1.) (5.). 5. (4.) (2.). 2. THANACHART SECURITIES 6

7 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 REGIONAL MARKET PERFORMANCE REGIONAL FUND FLOWS Change 1 Day (%) Change 1 Week (%) Change 1 Day (-1D) Hang Seng China Indonesia Nikkei MSCI Asia x JP Malaysia S.Korea (US$ m) 7 Taiwan India Nikkei 4 3 Hang Seng 2 12 China Indonesia Asia-6 Korea Taiwan Indonesia Philip. Thailand India S. Korea Philippines Taiwan India Singapore Dow Jones S&P5 Nasdaq Thailand (2.) (1.) MSCI Asia x JP Singapore Philippines Malaysia Dow Jones Nasdaq S&P5 Thailand (4.) (2.) Change 1 Week (-1W) (US$ m) (1) (2) (3) (4) (5) (6) (7) (129) (189) (521) (589) India Philip. Korea Thailand Indonesia Asia-6 Taiwan Change 1 Month (%) Change Year-To-Date (%) Change 1 Month (-1M) Philippines Indonesia Hang Seng MSCI Asia x JP India Singapore S. Korea (US$ m) India 1,5 1, 986 Nasdaq Dow Jones S&P5 (5) (26) (1,) (56) Indonesia (1,5) (1,136) (1,531) Nikkei (2,) India Philip. Indonesia Thailand Korea Asia-6 Taiwan Malaysia Taiwan China Nikkei Malaysia Nasdaq S&P5 Dow Jones Thailand (5) 5 1 Taiwan Thailand Singapore Hang Seng Philippines MSCI Asia x JP S.Korea China (3) (2) (1) 1 Change Year-To-Date (YTD) (US$ m) (5,) (995) (3,57) (1,) (4,65) (5,175) (15,) (8,812) (11,116) (2,) (25,) (3,) (35,) (4,) (34,21) Philip. Indonesia India Korea Thailand Taiwan Asia-6 THANACHART SECURITIES 7

8 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 General Disclaimers And Disclosures: This report is prepared and issued by Thanachart Securities Public Company Limited (TNS) as a resource only for clients of TNS, Thanachart Capital Public Company Limited (TCAP) and its group companies. Copyright Thanachart Securities Public Company Limited. All rights reserved. The report may not be reproduced in whole or in part or delivered to other persons without our written consent. This report is prepared by analysts who are employed by the research department of TNS. While the information is from sources believed to be reliable, neither the information nor the forecasts shall be taken as a representation or warranty for which TNS or TCAP or its group companies or any of their employees incur any responsibility. This report is provided to you for informational purposes only and it is not, and is not to be construed as, an offer or an invitation to make an offer to sell or buy any securities. Neither TNS, TCAP nor its group companies accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The information and opinions contained herein have been compiled or arrived at from sources believed reliable. However, TNS, TCAP and its group companies make no representation or warranty, express or implied, as to their accuracy or completeness. Expressions of opinion herein are subject to change without notice. The use of any information, forecasts and opinions contained in this report shall be at the sole discretion and risk of the user. TNS, TCAP and its group companies perform and seek to perform business with companies covered in this report. TNS, TCAP, its group companies, their employees and directors may have positions and financial interest in securities mentioned in this report. TNS, TCAP or its group companies may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any entity mentioned in this report. Therefore, investors should be aware of conflict of interest that may affect the objectivity of this report. Note: Thanachart Securities Public Company Limited act as a Market Maker and Derivative Warrants Issuer. At present, TNS has issued 14 Derivative Warrants which are ADVA16C1812A, ADVA16C1912A, AOT16C1912A, BANP16C1812A, BANP16C1912A, BDMS16C1812A, BDMS16C1912A, CBG16C1912A, CK16C1812A, CK16C1912A, CPAL16C1912A, PTT16C1912A, TRUE16C1812A, TRUE16C1912A (underlying securities are ADVANC, AOT, BANPU, BDMS, CBG, CK, CPALL, PTT, TRUE). Since TNS covers those underlying securities in research report, consequently TNS incurs conflicts of interest. Moreover, Investors are advised to carefully review the details and information in the prospectus before making investment decisions. Note: Our major shareholder TCAP (Thanachart Capital Pcl) which holding 1% of Thanachart Securities, TCAP has stake in THANI for more than 65% and being the major shareholder of THANI. Thanachart Capital Public Company Limited (TCAP), Ratchthani Leasing Public Company Limited (THANI), MBK PUBLIC COMPANY LIMITED (MBK) and PATUM RICE MILL AND GRANARY PUBLIC COMPANY LIMTED (PRG ) are related companies to Thanachart Securities Public Company Limited (TNS). Since TNS covers those securities in research report, consequently TNS incurs conflicts of interest. Recommendation Structure: Recommendations are based on absolute upside or downside, which is the difference between the target price and the current market price. If the upside is 1% or more, the recommendation is BUY. If the downside is 1% or more, the recommendation is SELL. For stocks where the upside or downside is less than 1%, the recommendation is HOLD. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal recommendation. For sectors, an Overweight sector weighting is used when we have BUYs on majority of the stocks under our coverage by market cap. Underweight is used when we have SELLs on majority of the stocks we cover by market cap. Neutral is used when there are relatively equal weightings of BUYs and SELLs. THANACHART SECURITIES 8

9 THAILAND s TOP LOCAL KNOWLEDGE Friday, December 14, 218 Thanachart Securities Pcl. Research Team 19 Floor, MBK Tower 444 Phayathai Road, Pathumwan Road, Bangkok 133 Tel: thanachart.res@thanachartsec.co.th Pimpaka Nichgaroon, CFA Head of Research pimpaka.nic@thanachartsec.co.th Kalvalee Thongsomaung Food, Hotel, Media kalvalee.tho@thanachartsec.co.th Phannarai Tiyapittayarut Property, Retail phannarai.von@thanachartsec.co.th Siriporn Arunothai Small Cap Research, Healthcare siriporn.aru@thanachartsec.co.th Wichaya Wongpanuwich, CFA, FRM Analyst, Retail Market wichaya.won@thanachartsec.co.th Pattadol Bunnak Assistant Analyst pattadol.bun@thanachartsec.co.th Adisak Phupiphathirungul, CFA Retail Market Strategy adisak.phu@thanachartsec.co.th Pattarawan Wangmingmat Senior Technical Analyst pattarawan.wan@thanachartsec.co.th Saksid Phadthananarak Construction, Transportation saksid.pha@thanachartsec.co.th Supanna Suwankird Energy, Utilities supanna.suw@thanachartsec.co.th Witchanan Tambamroong Technical Analyst witchanan.tam@thanachartsec.co.th Sittichet Rungrassameephat Assistant Analyst, Quantitative sittichet.run@thanachartsec.co.th Chak Reungsinpinya Energy, Petrochemical chak.reu@thanachartsec.co.th Nuttapop Prasitsuksant Electronics, Telecom nuttapop.pra@thanachartsec.co.th Sarachada Sornsong Bank, Financial sarachada.sor@thanachartsec.co.th Thaloengsak Kucharoenpaisan, AFPT TM Analyst, Retail Market thaloengsak.kuc@thanachartsec.co.th THANACHART SECURITIES 9