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Safe haven in a storm

Eight of nine stocks in positive territory

Amid an economic decline, the energy sector is providing better potential and safety than others. Eight of the nine listed firms surveyed provided positive returns to their investors over the past 12 months.

The only underperformer, at -20.8%, was Siam United Service Plc (Susco), which still faces financial trouble stemming from the economic downturn and poor investment decisions, notably a 2.7-billion-baht property development on the Eastern Seaboard.

Thai Industrial Gases led with a return of 163.1%, followed by Lanna Resources at 118.5%, in a sector that accounts for about 12% of the market's capitalisation.

Thai Industrial Gases benefitted from a decision by its parent, BOC Gases Australia, to increase its stake by paying major Thai shareholders 34 baht per share. However, the company is in the process of being delisted.

Third-ranked Banpu Plc delivered a healthy 74%, due to business and investment restructuring aimed at increasing shareholder value, said president Chanin Vongkusolkij.

The company had revised all of its investments and adopted a comparative method to guide decision-making on disposing of, maintaining or expanding various projects.

Mr Chanin said the company had shifted its focus abroad, especially in coal mining in Indonesia where returns were higher than in Thailand.

"The company revised its investments to focus only on the coal and electricity businesses in which it has expertise and competitiveness, while other businesses will be disposed of."Analysts forecast the investment in Indonesia would lift Banpu's revenue to 8.5 billion baht next year from seven billion projected this year.

Banpu reported a net profit of 93.2 million baht for its first quarter to Sept 30. The net profit of 941.4 million in the same period last year reflected the 3.6 billion baht received from the sale of its interest in Cogeneration Plc.

Mr Chanin said the outlook for energy stocks was still bright due to the planned privatisation of state enterprises, which had high market capitalisation and high equity growth. The arrival last week of the new giant, PTT Plc, is forecast to help lift the share value of most companies in the sector.

PTT Exploration and Production Plc (PTTEP), which had the highest market cap in the sector before its parent was listed, was ranked in the middle of the scorecard for its 12-month performance, but with stable prospects.

According to Prasert Bunsumpun, PTT's senior executive vice-president for the gas business group, PTTEP's business would remain separate from PTT's, but synergy would improve.

He said PTTEP would focus only on upstream natural gas and petroleum businesses while PTT would focus on downstream activities, with no more overlaps.

PTTEP, in the third quarter, improved its net profit year-on-year by 117% to 2.86 million baht, with sales rising 35% to 7.43 million baht.

"Energy stocks will be considered defensive stocks for investors in the period of an economic downturn," said Mr Prasert.

- Soonruth Bunyamanee