CMNT> STPI: Asia Wealth recommends BUY, target price is Bt28.80/share STP&I PCL (STPI) Stock Flash: STPI s robust 2Q14 results expected: - We expect a 4.9%QoQ rise and a 44.3%YoY jump in 2Q14 net profits. The companys revenue should not be adversely affected by the political turbulence in 1H14. QoQ profit growth expected - Lucrative construction revenue: We expect STPI to post a substantial revenue in 2Q14 at Bt2.85bn, surging 4.6%QoQ and up 138%YoY . The companys 2Q14 revenue should be strong given its huge Bt17.5bn backlog at the end of 1Q14 . STPIs business operation s should not be adversely affected by the political turbulence in 1H14. Its operations, however, may experience some minor delay due to additional changes in construction specifications. - Uncertainty over FX despite stable gross profit margin: We project STPIs 2Q14 normalized profit at Bt620mn. The gross margin from construction should remain the same as that reported in 1Q14 at 24%, as the company has currently realized most of its revenue from the Ichthys project in Australia. However, FX risks could affect its normalized profits in either positive or negative way. -Update on the Ichthys project timeline: Previously, the Ichthys project was scheduled to be completed by the end of 3Q15. However, the additional design of the construction has resulted in a shift of the project deadline to 1Q16. Nevertheless, the hirer is willing to pay 10% on top of the previously agreed project value or around an addition of Bt1.4bn. STPI expects the hirer to approve the reimbursement for the additional payment within 3Q14. Then, STPI should have additional income of around Bt180-250mn per quarter until the project is completed which is scheduled to be by the end of 4Q15. - Update on bidding process: STPI expects a lower probability of winning the LNG project in Russia worth Bt30bn due to following reasons: 1) the company bidding price for the construction is relatively high and 2) the company only has limited capacity left for such a large-scale project to operate simultaneously with the Ichthys project. Nevertheless, STPI is still able to handle a few other smaller projects; it has been in the process of bidding for 3 LNG projects, two in Canada and one in Mozambique. The results are expected at earliest in 4Q14 or in 1Q15. The total potential backlog is estimated at Bt40-45bn. - Maintain a BUY recommendation with a target price of Bt28.80 (46% upside and 2.5% dividend yield):For the full year 2014, we maintain our revenue forecast at Bt11.99bn (Bt11.37bn from construction, and Bt626mn from services and other income), and a net profit at Bt2.47bn. Thailand Research Department Mr. Warut Siwasariyanon Tel: 02 680 5041 Mr. Traikun Kitimahakun Tel: 02 680 5043 By Asia Wealth Securities Company Limited on Aug 5, 2014 This report has been prepared by Asia Wealth Securities Company Limited (AWS). The information herein has been obtained from sources believed to be reliable and accurate, but AWS makes no representation as to the accuracy and completeness of such information. AWS does not accept any liability for any loss or damage of any kind arising out of the use of such information or opinions in this report. Before making your own independent decision to invest or enter into transaction, investors should study this report carefully and should review information relating. All rights are reserved. This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of AWS. Investment in securities has risks. Investors are advised to consider carefully before making investment decisions.
Posted on: Tue, 05 Aug 2014 03:38:56 +0000
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