Top Thai Stock PTG Energy Forecasts 50% Annual Profit Growth

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PTG Energy Pcl, Thailand’s top performing stock in 2015, plans to boost its earnings 50 percent annually over the next three years by opening more gas stations in rural parts of the country.

The company, whose shares surged 85 percent this year through Wednesday, will spend about 3.9 billion baht ($120 million) expanding its network of gas stations to a minimum of 1,300 by 2018 from 951 last year, Chief Executive Officer Pitak Ratchakitprakarn said. The expansion will help triple sales of gasoline to about 6 billion liters in 2018 from 1.9 billion liters in 2014, he said.

PTG Energy, Thailand’s third-largest operator of petrol stations, is targeting demand for fuel by farmers and agricultural workers as competition by rivals in urban areas pressures profit margins and the nation’s economy slows. Both ConocoPhillips and Petroliam Nasional Bhd exited Thailand in the past decade.

“The aggressive expansion will continue to help maintain the strong earnings growth over the coming years,” Pitak said at his office in Bangkok on Wednesday. “The company’s strategy will still focus on new stations in the jungle or remote areas, where the competition is much less.”

PTG Energy earns about 90 percent of its fuel sales from gas stations located outside Bangkok and other metropolitan areas, according to Pitak. The company’s transportation network of about 300 fuel trucks allows it to control costs, Pitak said.

The company’s shares have nearly tripled since their listing in May 2013, while the stock is the best performer this year on the SET 100 index. PTG Energy’s net income jumped 58 percent to 494 million baht in 2014, according to its statement dated Feb. 24.

Its shares dropped 2.8 percent to 10.60 baht at the close in Bangkok, its lowest level since April 10. The company trades at 18.4 times its projected earnings for the next 12 months, compared with 14.2 times for the SET 100.

Untapped Demand

The company had the largest number of fuel outlets after state-owned PTT Pcl and Bangchak Petroleum Pcl as of June 2014, according to data on the Energy Ministry’s website. Petronas sold its gasoline retail business to Susco Pcl in 2012, while ConocoPhillips divested more than 100 gas stations in Thailand to PTT in 2007.

“There is still large untapped demand for gasoline and other fuels from motorists and farmers in rural areas,” Pitak said. “Yes, the economy is slowing down in Thailand, but fuel is considered a basic staple they have to consume.”

The Thai economy expanded at its slowest pace in three years in 2014, while consumer confidence has dropped to a nine-month low after the central bank cut its projections for growth. The government raised fuel prices to reduce subsidies after Prime Minister Prayuth Chan-Ocha, who seized power after a military coup last May following months of unrest, vowed to restructure energy pricing.

PTG Energy is also considering expanding into power generation, using biomass and other wastes as fuel, Pitak said.

“Higher sales volume will play a major role in improving cost efficiency and profit margin,” he said. “Gas stations along small roads will be the company’s strong growth area.”

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