Kiatnakin Phatra Securities on Thursday released an analysis on Thai stocks that stand to benefit from the rising gas price, with PTT and OSP both receiving a “BUY” recommendation.
In 2022, the average price of pool gas in Thailand increased by 78% to $2.64/mmbtu, compared to the average price of US$7.1/mmbtu during 2010-2021.
Consensus agreed that the sharp increase in 2022 energy rates greatly sparked the escalating cost of gas, which consequently pushed up Thailand’s inflation.
This year, however, the upward trend seems to be fading away because of the recent global gas price collapse, the benign global LNG price outlook, a rise in domestic gas production from the Gulf of Thailand, and the full impact of new gas price contracts (Erawan and Bongkot). And that lower gas prices should begin to ease high electricity prices in 2H23.
Kiatnakin Phatra predicts that the downward trend in average pool gas prices will have a positive effect on PTT’s gas EBITDA trend, which was negatively affected by a margin squeeze brought on by high pool gas prices in 2022. The S&M and NGV units, which would profit from a declining average pool price, hold the keys to the turnaround in EBITDA.
As for OSP, since the pool gas price has a strong inverse relationship with the company’s margin, the recovery trend in OSP’s margin that has been underway since 1Q23 should pick up steam if the pool gas price falls further. Both PTT and OSP continue to carry Buy recommendations from the brokerage.
