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Tipco Asphalt PCL (SET:TASCO), a 31.78% stake owned by Hong Kong-based BNP Paribas Securities (Asia) Limited for Colas Group, which is a major French civil engineering firm specializing in road construction and rail track construction, and 23.96% stake owned by Tipco Foods PCL (SET:TIPCO), as of March 4, 2016, is a major local and Asia-Pacific supplier of asphalt and petroleum products. The asphalt products are used in road construction, maintenance and paving industries.
The products are divided into 2 types: asphalt products for road applications including asphalt cement, cutback asphalt, asphalt emulsion, modified asphalt emulsion and premium grade asphalt, and special products, such as Tipco premix, Tipco joint sealer, Tipco joint primer, jet fuel resistant joint sealant and binder for tropical bridge jointing systems.
The company delivers its asphalt products to domestic customers in Thailand, as well as to neighboring countries, including Vietnam, Malaysia and Indonesia, by its own 9 ocean-going asphalt vessels and by a fleet of more than 300 trucks. Tipco Asphalt operates a refinery in Kemaman, Malaysia through its subsidiary, Kemaman Bitumen Company (KBC) Sdn. Bhd. with refining capacity of 30,000 barrels of heavy crude oil per day.
Tipco Asphalt said on August 9 that its second-quarter 2016 revenues, ending June 30, were 5.5 billion baht, down 47.56% from the same period last year. The revenues missed the 9.88 billion baht consensus estimate of the 2 analysts following the company, according to the Financial Times. The company posted second-quarter 2016 diluted earnings per share of 0.45 baht, missing an analyst’s expectation of 0.53 baht. The earnings were also 46.75% below that from the same quarter last year.
In the company press release, Tipco Asphalt blamed the lower revenues and profits on a decline in asphalt selling prices during the second-quarter, despite the fact that the company sold about 440,000 tonnes of asphalt. Managing director Chaiwat Srivalwat said after the earnings release that Tipco Asphalt expects domestic demand in the next quarter of about 500,000 tonnes of asphalt for state infrastructure and road-repair projects worth more than 2 billion baht, according to the Nation.
Shares of TASCO have been moving in a descending wedge chart pattern since November 2015. The stock is bumping into the trendline support of the descending wedge and can bounce from there. There is significant downside risk if the stock breaks down the 19 baht support level, as TASCO can drop quickly to the next support level at around 14 baht per share. As of September 30, 2016, the consensus forecast amongst 4 investment analysts polled by the Financial Times have rated the stock with a Hold rating, with the median 12-month price target of 25.75 baht per share.
Disclosure: No position in any companies mentioned and no recommendations. |
