Amid investor concerns that PTT Plc will face huge losses on oil inventories, analysts remain optimistic that energy price reform will offset those losses and strengthen earnings.
A motorist uses a self-serve pump on Srinakarin Road. Local retail fuel prices have fallen during the last six months in accordance with the global market. SOMCHAI POOMLARD
Benjaphol Suthvanich, an analyst at KK Trade Securities, said losses incurred on oil stocks should be limited by the fact that oil and refining are not the major revenue resources of PTT, the country's energy conglomerate.
Moreover, greater profit margins from natural gas, the company's core business, after the end of subsidies should bolster PTT's finances, Mr Benjaphol said.
Energy policymakers recently scrapped a large subsidy on liquefied petroleum gas (LPG) and began gradually eliminating the subsidy on compressed natural gas (CNG).
Mr Benjaphol estimated that PTT subsidised the two gases for motorists to the tune of 30 billion baht in 2013. LPG was capped at US$333 a tonne — less than half the global price.
"The burden was lifted and it will not receive an impact from oil stock losses," he said.
In contrast, some of PTT's subsidiaries — IRPC, Thai Oil, PTT Global Chemical Plc — could see huge losses on inventory because their major revenue sources are oil and refining.
KK Trade Securities estimates oil inventory losses at IRPC, Thai Oil and PTT Global Chemical as of year-end 2014 at 5.5 billion baht, 8 billion baht and 10 billion baht respectively.
Another analyst, Suthichai Kumworachai of Maybank Kim Eng Securities, expects PTT to get a higher profit from LPG business in the next few years.
Maybank Kim Eng forecasts a 7.2-billion-baht profit for PTT in 2015 and 7.8 billion baht in 2016.
Mr Suthichai said PTT could get more profit from the CNG business of 2.4 billion baht if the Energy Ministry continues to cut the subsidy on the gas.
The retail price of CNG is now pegged at 12.5 baht a kilogramme, well below the real market price of 16 baht.
Prices will be raised gradually by one baht every six months to reflect real market prices, according to the energy price reform plan.
Mr Suthichai said the floating LPG price would also help PTT gain a profit of 733 million baht as production costs would drop after scrapping the one-baht levy.
Sakarin Sasanon, an analyst at Aira Securities, said profit at PTT's subsidiaries would grow because of lower costs and rising production of high-value products such as polymers.
Thai Oil may swing from a 3.6-billion-baht stock loss last year to a profit of 7 billion baht in 2015, while IRPC's annual production of polypropylene is tipped to rise by 320,000 tonnes, meaning greater revenue.
Mr Sakarin said the optimistic forecast excluded the sale of spin-offs Bangchak Petroleum and Star Petroleum Refining.
PTT is due to receive another capital expenditure with the SET listing of Global Synergy Plc in the second quarter.
Fitch Ratings sees LPG prices as positive for PTT, helping it cut burdensome costs and adding cash flow and improved gross refining margins.
PTT shares closed yesterday on the Stock Exchange of Thailand at 322 baht, down six baht, in heavy trade worth 2 billion baht.