The share price of Thai Oil surged nearly 10% to THB28.00 per share in early session on Tuesday following more clarification from the company on the necessity to increase capital in the Clean Fuel Project for completion as the market also eases concerns over the matter.
On Monday Thai Oil Public Company Limited (SET: TOP) addressed public concerns at a press conference regarding its increased investment plans in the CFP for 63 billion baht.
The proposal aims to remedy complications caused by the main contractor, UJV, led by Samsung E&A (Thailand), Petrofac South East Asia Pte. Ltd., and Saipem Singapore Pte. Ltd. These issues have substantially delayed the project’s progress as subcontractors are on strike for not receiving payment from UJV.
An Extraordinary General Meeting of Shareholders will be convened on February 21, 2025, to seek approval for the increased investment, which also includes interest costs during construction at the amount nearly 18 billion baht.
CEO Mr. Bandhit Thamprajamchit emphasized the necessity of additional funding due to the unforeseen circumstances and the criticality of project completion, which has now been postponed to 2028 owing to intricate system integration processes in the final stages.
With the workforce reduced to mere thousands from almost 20,000, Thai Oil faces challenges in regaining operational momentum. This involves securing new subcontractors, labor investments, and retrieving essential equipment, which requires time and monetary resources.
Mrs. Wanida Boonpiraks, Executive Vice President of Finance and Accounting, explained that funding would derive from existing cash reserves, forecasted cash flow from operations over 2025–2027, and potential debt instruments. The current reserves are 30,000 million baht, while negating the need for a capital increase.
The debt-to-equity ratio will remain below 1, safeguarding Thai Oil’s credit rating. Although the project’s Internal Rate of Return has dropped to 7% from the initially estimated 12% in 2018, it still surpasses the company’s cost of capital, promising strategic benefits and rewards for stakeholders upon completion.
As for the countermeasure on UJV that is the main cause for the delay and troubled subcontractors, Thai Oil is currently in the process of filing a lawsuit against its main contractor.
Analysts from Kasikorn Securities express a positive outlook for Thai Oil’s stock, viewing its current price as undervalued, presenting a high rebound opportunity. The share price hit a 15-year low of THB25.50 yesterday.
“The current share price of Thai Oil is considered low, especially when compared to its book value of over 70 baht, reflecting a price-to-book value (P/BV) ratio of merely 0.35 times, indicating it is not expensive. We believe there is a high chance for a rebound today after a continuous decline in the stock price.”
