News Update

February 26, 2020

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PTTGC | highlights from analyst meeting

Management viewed that the outlook of petrochemical business should remain challenging until positive development of COVID-19 outbreak could be seen.

The downward cycle of the industry could open opportunities for new asset acquisitions at attractive price.

The new purchase and sales agreement for products with PTT could reduce PTTGC’s gas feed cost in the long run as the ethane price will better reflect market price of all PE products, not only HDPE. Also, the gas feed cost could be lower due to lower price of high-sulfur fuel oil, one of the parameters for gas price in the Gulf of Thailand, and lower gas price from new PSCs of Bongkot and Erawan. The profit sharing concept remains unchanged.

The adverse impact from China remains limited since the company already diversified its customer base to other countries, such as Indonesia and CLMV. Note that about 30% of its PE products is exposed to demand from China.

PTTGC targets to reduce HDPE film sales for single use to zero by 2022 from 121ktpa in 2019, or roughly 40% of total HDPE film sales.

The investment in US cracker project will be finalized by mid-2020 when the funding process could be concluded. Key terms and conditions for financing is under negotiation with financial institutions.

 

ACE | strong profit for 2019 was in line

> ACE's 2019F profit of Bt815mn (+49% YoY) was in line with our estimate.

> Behind this was better gross margin of biomass power plants, up from 28% in 2018 to 35% thanks to the improved feedstock management.

> Gross margin of waste power plant also increased YoY but the contribution to overall profit remained low at only 8%.

> The company's interest expense continued to fall, especially in 4Q19 due to loans repayment after the IPO.

> ACE's interest-bearing debts fell sharply from Bt7.7bn as of end-2018 to Bt3bn at the end of 2019.

> Net D/E fell from 1.4x (end-18) to only 0.3x (end-19). Nonetheless, this ratio will gradually increase during its investment phase of new power plants to double capacity by 2022.

> The company announced that it will omit dividend payment for 2019.  

  4Q18 1Q19 2Q19 3Q19 4Q19 YoY% QoQ% 12M18 12M19 YoY%
P&L (Bt, mn)                    
Sales and sevice revenue 1,262 1,213 1,318 1,267 1,258 (0.3) (0.7) 4,833 5,055 4.6
Gross profit 375 354 420 426 425 13.5 (0.3) 1,417 1,626 14.7
EBITDA 370 398 459 508 491 32.7 (3.3) 1,586 1,856 17.0
Core profit 114 161 257 235 266 132.0 12.8 557 919 65.1
Net Profit 118 133 209 228 245 108.8 7.5 547 815 49.2
EPS (Bt) 0.01 0.01 0.02 0.02 0.03 95.9 0.9 0.06 0.09 46.4
B/S (Bt, mn)                    
Total assets 13,887 13,866 13,896 13,885 14,145 1.9 1.9 13,887 14,145 1.9
Total liabilities 8,315 8,162 7,982 7,743 3,352 (59.7) (56.7) 8,315 3,352 (59.7)
Total equity 5,572 5,704 5,914 6,142 10,793 93.7 75.7 5,572 10,793 93.7
BVPS (Bt) 0.61 0.62 0.65 0.67 1.06 74.3 58.2 0.61 1.06 74.3
Financial ratio (%)                    
Gross margin (%) 29.7 29.2 31.9 33.7 33.8 4.1 0.1 29.3 32.2 2.8
EBITDA margin (%) 29.3 32.8 34.8 40.1 39.0 9.7 (1.1) 32.8 36.7 3.9
Net profit margin (%) 9.3 10.9 15.9 18.0 19.5 10.2 1.5 11.3 16.1 4.8
ROA (%) 3.3 4.6 7.4 6.8 7.6 4.3 0.8 n.a. 5.8 n.a.
ROE (%) 8.2 11.4 17.7 15.6 12.5 4.3 (3.1) n.a. 10.0 n.a.
D/E (X) 1.5 1.4 1.3 1.3 0.3 (118.2) (95.0) 1.5 0.3 (118.2)

TCAP's 2019 result

TCAP reported net profit for 2019 of Bt10.8bn (+38%), which is above our forecast by 15%.  Note that the 2019 financial statement cannot be compared with the previous result due to the change in holding structure in the group.  We put our forecast under review, pending for the analyst meeting on February, 21. 

 

TISCO: Higher dividend than expectation

TISCO announced DPS for 2019 at Bt7.75, higher than our forecast of Bt7.25.  This is equivalent to a dividend yield of 7.5%.

 

AAV: Key takeaway from analyst meeting

Overall tone is negative. The operations are dragged by the outbreak concern. AAV expects the better situation in 2H20. We maintain cautious view in airline sector.

* AAV has cut 3000-3700 flights in 2Q-3Q20, 10% of its total capacity, mainly routes to China, Hong Kong, Singapore and Maldives due to the COVID-19 outbreak.

* The company targets 7-8% revenue drop in 2020, dragged by 5-6% drop of passenger traffic.

* The company believes its diversified portfolio with 40% of revenue derived from domestic market will somewhat help dilute impact.

* The company is focusing on cost control and plans to negotiate with AOT to reduce airport-related costs e.g.  landing parking fee.

 

* Its cash flow management will support by ~Bt3,000mn cash from sales and leaseback transaction expected to complete in 1Q20.

 

AAV: 4Q19: Loss quarter

AAV: 4Q19: Loss quarter.

AAV reported 4Q19 net loss of Bt72mn. Excluding FX gain, its core loss was Bt116mn. AAV reported net loss for three quarters in a row, dragged by weak revenue growth and rising cost. For 2019, AAV reported net loss at Bt474mn vs. net profit at Bt70mn in 2018.

In 4Q19, passenger traffic dropped by 1.5% YoY (but up 3% QoQ) aligning with its capacity management amid the weak travel demand. However, its average fare in 4Q19 grew 6% YoY and 4% QoQ, mainly driven by stronger domestic routes.

While AAV has a benefit from falling jet fuel price, the cost ex. fuel has increased; Cost ex fuel per ASK raised 12% YoY and 13% QoQ due to fixed cost burden.

Recommendation. We expect the loss will continue in 1Q20. We have a cautious view on airline sector from the weak Thai tourism outlook due to outbreak concern and intense competition.

(Bt mn) 4Q18 1Q19 2Q19 3Q19 4Q19 %YoY %QoQ 2018 2019 YoY%
Revenue 9,655 11,155 9,609 9,419 9,998 3.5 6.1 38,905 40,181 3.3
Gross profit 110 1,536 (379) 69 596 440.1 765.6 2,481 1,822 (26.6)
EBITDA (59) 1,421 (575) 34 386 NM NM 2,076 1,266 (39.0)
Core profit (335) 421 (599) (373) (116) NM NM (68) (667) NM
Net profit (270) 497 (482) (417) (72) NM NM 70 (474) NM
Core EPS (Bt/share) (0.06) 0.10 (0.10) (0.09) (0.01) NM NM 0.01 (0.10) NM
Balance Sheet                    
Total Assets 62,376 62,179 60,996 61,066 62,903 0.8 3.0 62,376 62,903 0.8
Total Liabilities 33,273 32,786 32,482 33,310 35,214 5.8 5.7 33,273 35,214 5.8
Total Equity 29,103 29,393 28,515 27,756 27,688 (4.9) (0.2) 29,103 27,688 (4.9)
BVPS (Bt/share) 4.27 4.30 4.21 4.12 4.11 (3.8) (0.2) 4.27 4.11 (3.8)
Financial Ratio                    
Gross Margin (%) 1.1 13.8 (3.9) 0.7 6.0 4.8 5.2 6.4 4.5 (1.8)
EBITDA margin (%) (0.6) 12.7 (6.0) 0.4 3.9 4.5 3.5 5.3 3.2 (2.2)
Net Profit Margin (%) (2.8) 4.5 (5.0) (4.4) (0.7) 2.1 3.7 0.2 (1.2) (1.4)
ROA (%) (2.2) 2.7 (3.9) (2.4) (0.7) 1.4 1.7 (0.1) (1.1) (1.0)
ROE (%) (4.6) 5.8 (8.3) (5.3) (1.7) 3.0 3.6 (0.3) (3.3) (3.0)
D/E (X) 0.7 0.7 0.7 0.8 0.8 0.1 0.0 0.7 0.8 0.1
Statistics 4Q18 1Q19 2Q19 3Q19 4Q19 % Chg % Chg 2018 2019 % Chg
            YoY QoQ     YoY
Passengers carried (mn) 5.5 5.9 5.6 5.3 5.4 (1.5) 2.7 21.6 22.1 2.6
Load factor (%) 86.0 90.0 83.0 81.0 86.0 0.0 5.0 84.9 84.2 (0.8)
ASK (mn seat-km) 6,460 6,874 6,903 6,766 6,398 (1.0) (5.4) 25,019 26,941 7.7
RPK (mn passenger-km) 5,452 6,151 5,643 5,444 5,433 (0.3) (0.2) 21,243 22,671 6.7
Seat average fare (Bt) 1,419 1,554 1,390 1,457 1,508 6.3 3.5 1,537 1,474 (4.1)
No. of aircrafts 62 62 62 62 63 1.6 1.6 62 63 1.6
Revenues per ASK (RASK, Bt) 1.49 1.62 1.39 1.39 1.56 4.7 12.2 1.64 1.51 (7.9)
Cost per ASK (CASK, Bt) 1.60 1.53 1.57 1.49 1.61 0.6 8.1 1.56 1.55 (0.6)
Fuel cost per ASK (Bt) 0.61 0.53 0.55 0.51 0.50 (18.0) (2.0) 0.56 0.54 (3.6)
Cost ex fuel per ASK (Bt) 0.99 1.00 1.02 0.98 1.11 12.1 13.3 1.00 1.01 1.0
RASK-CASK (Bt) (0.11) 0.09 (0.18) (0.10) (0.05) NM NM 0.08 (0.04) NM
 

CPN: Key takeaway from analyst meeting

- CPN reveals its impact from coronavirus on its sales. Of its 33 malls (80% to revenue), 8 malls (24%) is classified as tourist destinations which it observed the drop in traffic of 10-15%.

- It expects sales impact in its high-tourist malls from 1) the drop in revenue sharing from consignment sales (44% to total); 2) its potential offering of rental rate discount by 10-30% to tenants (fixed rental rate and minimum guarantee consignment), starting from Feb; 3) lower revenue from food court (2% to revenue). Moreover, its expect occupancy rate from hotel revenue (3% to revenue) to decline.

 

- In 2020F, CPN targets revenue growth of 8%, from same store rental growth of 3-4%, and GPM improvement of 200bps YoY. In new base case (3-4 months impact from coronavirus), it targets revenue growth of 6-7%,  from same store rental growth of 2-3%, and GPM improvement of 150-200bps YoY. In worse case (more than 6 months impact from coronavirus), it targets revenue growth of 5-6% YoY, from same store rental growth of 1-2%, and GPM improvement of 100-150bps YoY.

SPALI 4Q19 above consensus, but met SCBS

SPALI released 4Q19 NP of Bt1.8bn, +16% YoY but +45% QoQ.

This brought 2019 NP to Bt5.4bn, -6% YoY due to squeezed revenue (-8% to Bt23mn) and lower equity income (-24% to Bt234mn) despite gross margin improved 110bps on high-margin condos transfer.

We look for SPALI’s earnings growth of 6% in 2020 and 12% in 2021.

Above our expectation, it announced final DPS of Bt0.6, yield of 3.7%. XD is on April 28.

Our current rating is BUY, PT Bt20

 

GLOBAL: 4Q19 beats estimates

- GLOBAL reported a 4Q19 net profit of Bt594mn, +42% YoY and +36% YoY.

- The results beats our estimates by 40% and market consensus by 36%, mainly on 1) stronger than expected gross margin of 22.96% (+220bps YoY) from more high margin private brand to sales to 18-19% (vs 14-15% in 4Q18); 2) higher other income of Bt342mn (+125% YoY) from more rebate income from suppliers in tandem with its more purchased volume. Meanwhile, its SSS growth was -1% YoY.

- In 1Q20TD, we expect its SSS growth to be -1-2% YoY. Looking ahead, its earnings growth will be driven by margin improvement notably from 1H19’s low base from inventory adjustment.

- Maintain BUY on GLOBAL with TP of Bt18.