Expected 2Q10 earnings of Bt 3.4bn, down 14%YoY
We project BANPU’s 2Q10 earnings at Bt 3.4bn, down 14%YoY but up 27%QoQ. The YoY earnings slowdown was caused by the 31% drop in equity income, especially from BLCP. Meanwhile, the QoQ earnings surge was attributable to the rise of the ASP following the uptrend in coal prices.
Maintain “Buy” with mid-11 target price of Bt 791
As a result of solid demand and the strong coal price outlook, BANPU will benefit the most as the majority of its earnings are from the coal business. Moreover, the acquisition of CEY (if successful) will provide 16-30% earnings upside and add value to BANPU by 12-24%. As such, we iterate “Buy” BANPU with the next 12 months sum-of-the-parts target price of Bt 791.
SGP: Weaker earnings expected in 2Q10!
Weaker profits expected in 2Q10:
We estimate SGP to post its 2Q10 net profits at Bt300m, up 7.2% YoY but down 8.5% QoQ. Its 1H10 earnings were expected at Bt628m, up 15.2% YoY, representing 45% of our full-year estimate. The YoY improvement was mainly due to improving LPG consumption; meanwhile, the QoQ weakening performance was the result of the softening demand as a result of political riot in Bangkok . Looking forward, we expect its profitability to gradually rise due to a peak demand season in later half of the year and the realization of earnings from the investments in Vietnam and Singapore .
Maintain HOLD:
Although SGP share price exceeds our current 12-month price target of Bt14.7, we maintain HOLD rating to SGP as our fair price is set on 9.0x PER. We believe that if SGP could close the acquisition deal in China , its share price will be re-rated to 10.0x PER as the other LPG trading players in the region have been traded at 12.0x PER. As the current share price is partly reflected this acquisition deal, key risk is the success of the deal, which should be completed prior this Sep 2010.
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