Thai Oil Public Company Limited (SET: TOP) shedded 16.5% during the morning session in the Thai stock market following the announcement in early morning calling for an extraordinary shareholder meeting to approve an increase in CFP investment worth 63 billion baht.
The share price of TOP settled the morning session on December 20, 2024, at THB29.25 per share, representing a drop by THB5.75 per share or 16.43%. This marks the lowest level since late March 2020 amid the height of Covid-19 panic.
TOP’s Clean Fuel Project (CFP) is facing a stoppage as subcontractors are on strike due delayed payment from their main contractor, comprising Samsung E&A (Thailand) Co., Ltd., Petrofac South East Asia Pte. Ltd. and Saipem Singapore Pte. Ltd. in a joint venture known as UJV.
The Board of Directors of Thai Oil see benefits and advantages on completing the project outweigh the prolonged delay, thus decide to propose a plan to increase investment in the project, which will be voted by shareholders on February 21, 2025.
Read: Thai Oil Plans to Inject Additional THB63 Billion for CFP Completion by 2028
Krungsri Securities holds a negative view on the increased valuation of the CFP project, excluding interest, which could rise by 33% if approved by shareholders. Including construction interest, the investment would increase by THB 80,950 million, initially impacting their price target by approximately THB 36 per share (noted that in the latest review by Krungsri, the firm held target price at THB 73.50).
Krungsri Securities suggests avoiding investing in TOP due to significant changes in project returns and downside risks to the target price, considering potential uncertainties during construction, which will be detailed in a meeting later today.
Additionally, Krungsri Securities is revising down TOP’s forecasts and recommendations reflecting the increased investment impact of the CFP project, advising to avoid investment.
Bualuang Securities notes that initial assessments indicate the additional investment and project delays (beyond their current expectation for completion in 2026) could represent a downside risk of around 2% on 2025 earnings estimates and an average of 24% downside on 2026-2028 estimates. Net debt/equity is expected to rise from about 0.4 to 0.6.
This news likely presents negative sentiment towards the stock price, with downside risks to earnings estimates potentially putting continued pressure on share prices, maintaining a “Sell” recommendation.
Investors are assessing the report and impact from this proposal. Despite the EGM being two months from now and yet to be decided, the share price of TOP has suffered a significant loss in today’s trading session.
LSEG’s consensus prior to this announcement has 12 brokers recommend ‘Buy’ on TOP, 3 recommend ‘Hold’ and 4 recommend ‘Sell’ with a consensus target price at THB 55.13 per share.
