March 15 (Bloomberg) -- Crude oil costs the same all over Asia. Oil refiners don't, especially in Thailand.

Investors value PTT Pcl, which owns stakes in most of the country's chemical makers and refiners, at nearly half the price-earnings ratio of the average Asian oil and gas stock. Thai Oil Pcl, the biggest refiner, sells for 30 percent less.

Thai refining shares are down 5 percent on average from Dec. 18, the day before the market tumbled on the government's abortive attempt to impose capital controls. India's Reliance Industries Ltd., owner of the world's third-largest refinery, is up 0.1 percent, while the Morgan Stanley Capital International index of Asia energy stocks is down 1.7 percent.

At the same time, Asia's crude-oil processing profits have risen and petrochemical prices are near records. Given those increases, Thai refiner shares are set to rise, said investor Tragoolchitr Chittasaiyapan.

``We've added PTT holdings this year,'' said Chittasaiyapan, who oversees $1.5 billion as chief investment officer at Thanachart Fund Management Ltd. in Bangkok. ``These companies have strong cash flow and will pay steady dividends. Valuations are attractive.''

Shares of PTT, Thailand's largest company, trade at 5.9 times earnings, while stocks in the MSCI Asia-Pacific energy index are priced at 11.5 times. Reliance Industries trades at 19 times and Hong-Kong listed China Petroleum & Chemical Corp., Asia's largest oil refiner, sells for 12 times profit.

Market Plunge

Crude oil in New York rose 22 percent last year to a record close of $77.03 a barrel on July 14. Crude averaged $66.25 a barrel in 2006, 60 percent higher than the 2004 average.

``We like PTT a lot because it is the largest oil company in Thailand and demand for its products will grow,'' said James Chua, who counts PTT shares among the $230 million he helps manage at Phillip Capital Management Ltd. in Singapore. ``Thai companies present very good value in general after being oversold in December.''

Unlike refiners in China and India, which buy crude oil at international prices and sell refined products at government- capped prices, Thailand's refiners have been free of price constraints since the government scrapped fuel subsidies in 2005. Adjusting fuel prices to the cost of crude imports helps PTT, which controls 37 percent of Thailand's retail fuel market, reap the benefits of higher refining margins.

Still, Thai petrochemical shares haven't recovered from the fiasco that was sparked on Dec. 18 with proposed controls on foreign investors to keep currency speculation at bay. After stocks plunged 15 percent on Dec. 19, the government said it would exempt stocks from the limits.

The government today scrapped most capital controls in an attempt to restore investor confidence after the December market slide, the index's steepest decline in 16 years.

Thailand has been under military rule since Sept. 19, when the armed forces ousted Prime Minister Thaksin Shinawatra's government.

`Uncertainty'

Rayong Refinery Pcl, a PTT unit, and ethylene producer IRPC Pcl are among the 10 worst performers in the MSCI energy index, which has gained 13 percent in the past six months. Thailand's benchmark SET Index has lost 3.8 percent.

Cheap valuations don't justify investing in Thai energy stocks, said investor Beat Lenherr. The proposed capital controls, the resignation of the junta's finance minister and the prospect of elections later this year have undermined confidence.

Thailand's economy, Southeast Asia's second biggest, last quarter grew 4.2 percent, its slowest pace in two years, a March 6 government report showed.

``We're keeping out of the Thai market because of the political uncertainty,'' said Lenherr, who helps manage $7 billion of assets in Asia as Singapore-based chief investment officer of Liechtenstein's LGT Bank. ``Valuation is not the primary issue.'' The bank sold all its Thai holdings last year.

Rising Margins

Analysts at Credit Suisse Group are more optimistic. They raised PTT's stock rating to ``outperform'' from ``neutral'' on March 9. Analysts Sai Sarinee Sernsukskul and Siriporn Sothikul in Bangkok lifted their 12-month price estimate by 1.7 percent, saying the company's gas business would contribute more to profit.

Business is improving for Asian refining and petrochemical companies.

Refining margins, or the profit from turning crude oil into gasoline, diesel and other products, averaged $7.19 a barrel in Singapore in the four weeks ended March 2, a 10.6 percent gain from a year earlier, according to Merrill Lynch & Co. Rayong Refinery posted a net profit in the fourth quarter from a loss a year ago.

Prices of ethylene, the building block of plastics and synthetic fibers, rose 18 percent to $1,170 a ton in Southeast Asia in the year ended March 9, according to data by chemical pricing service ICIS.

Petrochemical prices are rising as China's burgeoning manufacturers import chemicals from across Asia to make electronics, toys and construction materials.

PTT

IRPC, an ethylene producer that's 31 percent owned by PTT, expects profit to rise this year as the company boosts production, President Piti Yimprasert said on Feb. 22.

Stockbroker Phatra Securities Pcl on March 12 raised shares of PTT Chemical Pcl, Thailand's second-biggest chemical maker and 50 percent owned by PTT, to ``buy'' from ``neutral'', citing a bullish outlook on the petrochemical industry through 2008.

PTT, the country's sole natural gas distributor, reported a record net income of 95.3 billion baht ($2.7 billion) in 2006, an 11 percent increase from 2005, in a filing to the Thai stock exchange on Feb. 23.

``We still like PTT,'' said Kitti Nathisuwan, head of research at TMB Macquarie Securities (Thailand) Ltd. in Bangkok, who rates PTT, Thai Oil and IRPC as ``outperform.'' ``The oil and gas conglomerate is trading at a bigger discount than it should be, even after taking into account the higher risk to investors in light of recent political events.''

To contact the reporter on this story: Trisha Huang in Singapore at thuang14@bloomberg.net.

Last Updated: March 15, 2007 06:57 EDT