OR: The Light at the End of the “Long” Tunnel

The share price of PTT Oil and Retail Business Public Company Limited (OR) has a high turnover volume each day, but the price spread is so small to make it a nightmare for day traders.

 

After a huge surge from its IPO price at Bt18 per share, OR rose to the Bt30 level within two trading days and has been traded mostly around Bt31 with 2-3 price spread or Bt0.50 – Bt0.75 between the highest and lowest of the day.

Assuming the average cost of OR in the portfolio is Bt31.00 per share, and being able to sell at Bt31.50 per share, that would make it a 1.6% return. However, the 1.6% might not be a favourable amount day traders seek, let alone a 0.8% return for 1 price spread.

Furthermore, the share price at Bt31.00 per share might be a bit too expensive for average traders to purchase in a large amount for a day trading. To get a return worth 2,500-5,000 a day required investment at the amount of 310,000 baht.

 

More importantly, OR has just snapped its 7-day par-and-losing streak, when the share price closed flat for 3 days and lower for 4 days, in today’s session to closed at Bt31.50 per share, increased Bt0.25 or 0.80% with a trading volume of 43.7 million shares.

These historical trading sessions were like a long tunnel. Without being able to see the light at the end, day traders were hesitant in getting on the train.

 

However, there is always a light at the end of the tunnel no matter how long it is, and that is why OR might have caught the attention of long-term investors.

Looking ahead, there is no denying that the future of OR will continue to shine even brighter each year.

 

Ms. Jiraphon Kawswat, Acting President and Chief Executive Officer of OR, revealed that OR planned to expand its gas stations by 110 branches this year from the existing 2,000 branches. Meanwhile, oversea branches are expected to increase by 50 to make a total of 132 branches, mainly in Laos, the Philippines, Cambodia and Myanmar.

As for the advancement to China, the company established “PTTOR China” to operate lubricant business, while having three Cafe Amazon in the country.

OR also announced a 5-year plan (2021-2025) with a budget of 74 billion baht, allocating 35% to oil and gas business, 30% to non-oil business and 13% to overseas business. The remaining 22% will be funded for the new S-Curve, focusing on lifestyle and mobility business.

The plan highlighted the future outlook for OR that will be focusing on non-oil and overseas business.

In addition, the Annual General Meeting of Shareholders approved a dividend payment of Bt0.10 per share to be paid on April 28, 2021.

 

Sadly, the share price seems to be unaffected by this positive outlook.

 

Nevertheless, it has not been fully two months since OR’s first trading day in the Stock Exchange of Thailand, so it might be too soon to tell.

On the other hand, a good number of analysts had recommended either to hold or sell OR, giving the target price at a range between Bt25 – Bt28 per share. Only Finansia Syrus Securities and Trinity Securities that went against the trend and recommended “BUY” at the target high as Bt41.00 per share.

 

Finansia Syrus Securities (FSS) has given a “BUY” recommendation on OR and a target price of ฿41.00/share in anticipation of CAGR growth at 21.8% in 2020-23 with 3 key drivers: 1) the expansion of its fuel stations in Thailand; 2) growth in its non-oil F&B businesses, particularly its Café Amazon and the number of convenience store outlets; and 3) the expansion of its overseas presence in new existing markets to leverage OR’s core business value of the one-stop shop with a “Living Community” concept to offer “more than just a service fuel station” experience for customers.

Meanwhile, the security company expected to see a demand recovery in 2021-23, and projecting the growth in cups sold to be 54.6m in 2021, 82.2m in 2022, and 87.2m in 2023, driving up its EBITDA growth to 25% CAGR in 2020-23 at 20.9 billion baht and its net profit to 49% CAGR at 8.6 billion baht in 2023.

FSS also believed that OR has a strong growth potential to expand its business footprint overseas, not only as a fuel station business but also as an F&B segment to penetrate new markets and grow its presence in existing markets. OR has also expanded its business into ASEAN and other Asian markets, leveraging its business model of integrated oil and non-oil ventures at its fuel stations.

 

Trinity Securities has given a “BUY” recommendation on OR with a target price at ฿40.00/share, stating that the current share price has not reflected the investment valuation of OR from the IPO, while having a business value equivalent to Bt26.00 and the future investment from its IPO would be Bt14.00, based on the discount rate.

More importantly, the Community Mobility Reports from Google indicated that the traffic has returned to pre-Covid level, which would benefit gas consumption.

Trinity Securities estimated OR’s earnings in 2021 at 12 billion baht, increased 42% from the recovery of the oil business. Sales volume was expected to increase 20% YoY.