Thai Oil Shares Break Out As The Company Sees Improved Gross Refining Margins And Thai Demand

Witawat (Ed) Wijaranakula, Ph.D.
Mon Mar 13, 2017

Thai Oil Public Company Limited (SET:TOP), 49.1% stake owned by PTT Public Company Limited (SET:PTT) as of September 13, 2016, is a Thailand-based oil refiner and marketer of petroleum products and is the refinery flagship of PTT. Thai Oil operates business segments, including oil refinery, petrochemical, lube base oil, solvent and chemical products, power generation, petrochemical, oil and chemical products transportation services, ethanol manufacturing, and others including an energy consulting service. 

The TOP oil refinery, which is the largest in Thailand, can produce a variety of products including petroleum, petrochemical products and lube base oil, has a capacity of 275,000 barrels per day (bpd) in Chonburi. Thai Oil is considering expanding its capacity to 400,000 bpd and will make a decision on whether or not to proceed in the second-quarter of 2017, according to Reuters.

Some of TOPís direct and indirect subsidiaries include Thai Paraxylene Co., Ltd, Thaioil Marine Co., Ltd, Thaioil Energy Services Co., Ltd. Thaioil Ethanol Co., Ltd, Thaioil Power Co., Ltd, TOP SPP Co., Ltd., and Sak Chaisidhi Co., Ltd.

Thai Oil said on February 15 that its fourth-quarter 2016 revenues were 77.10 billion baht, up 12.65% year-on-year, but missing the 81.41 billion baht consensus estimate by 3 analysts, according to Thomson Reuters. The company posted fourth-quarter 2016 earnings of 3.43 baht per share, exceeding the 1.93 baht per share consensus estimate of 4 analysts. For the full-year 2016, Thai Oil reported earnings of 10.30 baht per share, beating the 8.62 baht per share consensus estimate of 26 analysts, on revenues of 274.74 billion baht, compared to the 269.94 billion baht consensus estimate.

In a press release, Thai Oil said its gross refining margin (GRM) including stock gain/(loss) in the fourth-quarter 2016 was US$9.50 per barrel, a US$5.80 per barrel increase from a quarter ago, and up US$4.30 per barrel from a year ago. GRM is the difference between the total value of petroleum products coming out of an oil refinery (output) and the price of crude oil. TOP also said that a higher throughput and better GRM including stock gain/(loss) helped improve its EBITDA and net profits, despite a foreign exchange loss. The company is expecting improved Thai demand on a higher government infrastructure budget and road maintenance plan.

TOP reported a dividend of 4.50 baht a share in 2016, which represents a 66.67% increase from 2015. The 24 analysts covering the company expect dividends of 3.34 baht a share for the upcoming fiscal year, representing a decrease of 25.84%. 

The shares of TOP broke out the symmetrical triangle chart pattern in early November 2016, while the stock continues trading in a bearish ascending wedge chart pattern. There are multiple supports if the stock breaks down the ascending wedge. As of March 11, 2017, the consensus forecast amongst 27 investment analysts polled by Thomson Reuters advises TOP investors to Hold, with the median 12-month price target of 77 baht per share.

Disclosure: No position and no recommendation.


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