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22 เมษายน 2020

"EPG-TASCO-PRM-AAV" stand to benefit from oil meltdown

EPG-IRPC-สถาบันเทคโนโลยีพระจอมเกล้าฯ บริจาคตู้ตรวจเชื้อให้รพ.สงฆ์


EPG ร่วมใจสู้ภัย Covid-19 มอบหน้ากากอเนกประสงค์ EP-KARE-Aeroklas Face Shield ให้แก่รพ.ศิริราช


News Flash

The WTI for June delivery slumped drastically 43.4%, or USD8.86, to USD11.57/bbl overnight, which marked the lowest level since February 1999. Brent for June delivery also dropped 24.4%, or USD6.24, to USD19.33/bbl. Key negative factors are 1) a drastic drop in global demand given the COVID-19 pandemic, and 2) a small decrease of coordinated crude production of 9.7mn barrels per day from OPEC and its ally, while the global demand, thus far, has dropped 30mn bpd. (Source: Infoquest)


Implication

EPG, TASCO, PRM, AAV as a prime beneficiary of oil meltdown


 EPG’s cost of major raw materials (PP, PET, HDPE) is tied to crude oil price, and thus the drop in the crude price should bode well for its earnings outlook. 


 TASCO’s gross profit margin is expected to improve in the event of falling oil price.


 Airlines (AAV, BA, NOK) should enjoy the slump in crude oil price, in terms of lower jet fuel cost that accounts for 30-40% of total revenue. Additionally, these airlines are going to resume their flights to certain destinations in early May.


 Dry bulk shippers (PSL, TTA, RCL, PRM) should benefit from the crude price collapse as the cost of oil has the largest slice in their operating costs. PRM is expected to enjoy a stronger demand for FSU but such benefit is likely to be tempered by its one-year rent contract; however, we expect the company to increase its rental rate once the existing contracts end.


 Power producers (BGRIM, GPSC, GULF) should enjoy a lower production cost as 70% of the total production cost is a cost of natural gas, which is tied to crude oil price. SPP producers are the first to experience such benefits as the Ft rate will be cut to reflect a real cost. 

Upstream oil players (PTTEP, PTT), refineries (TOP, SPRC, BCP, IRPC), and petrochems (SCC, PTTGC) to suffer the oil price collapse


 PTTEP is expected to suffer the most from the oil price meltdown. Our study indicates that a decrease in oil price by USD1/bbbl will result in PTTEP’s net profit dropping by Bt900mn. If the crude price falls below USD30/bbl, PTTEP is expected to endure earnings loss given its cost at USD30/bbl. PTTEP’s share price thus looks likely to tumble for the short term (Fig 3).


 Refineries (TOP, SPRC, BCP, IRPC) are expected to book stock losses in 2Q20, which may drag their earnings into negative territory. 


 Petrochemicals (SCC, PTTGC) are also expected to book stock losses in 2Q20.


 PTT as the Mother Company should be weighed down by its subsidiaries as well. 



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