Shares Of PTT Global Chemical Are Bumping Into Trendline Resistances As Investors Wait For The Next Catalyst

Witawat (Ed) Wijaranakula, Ph.D.
Fri Apr 7, 2017

PTT Global Chemical PCL (SET:PTTGC), 50.18% stake owned directly and indirectly by PTT PCL (SET:PTT), as of September 6, 2016, is Thailand's largest petrochemical and refining company with a capacity of 280,000 barrels of crude oil and condensate per day intake, processing various high-quality petroleum products with total capacity of 228,000 barrels per day. The company has a combined production capacity of 2,259,000 tons per year producing aromatics products including benzene, paraxylene, cyclohexane, orthoxylene, toluene, and mixed xylenes.

The business operations are divided into eight segments: refinery and shared facilities including liquid petroleum gas (LPG), diesel and crude refining unit; aromatics including benzene, paraxylene and mixed xylenes; olefins and derivatives; polymers; ethylene oxide (EO) based performance, used as components for cosmetics, feedstock for the textile industry, clear plastic containers, hygiene products, pharmaceuticals and livestock feed; green chemicals, such as fatty alcohol and methyl ester; high volume specialties, products for intermediate and downstream petrochemicals, and phenol, used in upstream products and other downstream industries, including automotive, construction, and engineering plastic.

The company said on February 14 that its fourth-quarter 2016 revenues were 109.74 billion baht, up 14% year-on-year, exceeding the 96.15 billion baht consensus estimate of 5 analysts, according to Thomson Reuters. PTT Global Chemical posted fourth-quarter 2016 fully diluted earnings of 2.18 baht per share, up 109% year-on-year. For the fiscal year 2016, earnings were 5.74 baht per share, up 26.2% year-on-year, on revenues of 349.1 billion baht, down 13.5% year-on-year. The full-year earnings exceeded the 5.11 baht per share consensus estimate of 21 analysts, while the revenues came in short of analysts' expectations for 358.18 billion baht. 

In the company press release, PTT Global Chemical said its fourth-quarter 2016 performance improvement was derived from more efficiency in the production process that affected a better utilization rate, supporting higher margins in the Olefins and Aromatics businesses. Comparing 2015 and 2016, the company reported that net profits increased due to higher crude oil prices and stock gain realization, while in 2015 it had stock losses. Petroleum volume sales, however, were down 20% year-on-year.

For 2016, PTTGC reported a dividend of 2.95 baht per share, up 9.26% from 2015. The 21 analysts covering the company expect dividends of 3.18 baht per share for the upcoming fiscal year, representing a year-over-year increase of 7.76%. The next earnings announcement is expected on May 9. Analysts are expecting first-quarter 2017 earnings of 1.53 baht per share, on revenues of 82.17 billion baht. 

Technically, shares of PTTGC broke out a descending broadening wedge chart pattern at around 64 baht in early January. The stock has run up about 14% since then, and has been bumping into trendline resistances at the 74 baht level since the end of March. The stock needs catalyst in order make a breakout. According to Thomson Reuters, the consensus amongst 24 polled investment analysts covering PTT Global Chemical gave the company an Outperform rating, with the median 12-month price target of 77 baht per share, as of April 3, 2017.

Disclosure: No position and no recommendation.


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