DBS Vickers Selects Four Commodity Plays for Economic Recovery

According to DBS Vickers Securities (DBSVS), investor worries about the Federal Reserve’s monetary policy have started to subside, but concerns about the reduction of quantitative easing remain. The US economy is expected to resume normalcy shortly after the US issued new masking regulations. Outdoors and in the most indoor settings, fully vaccinated people will not be required to wear masks.

For Thailand’s economic outlook, despite domestic Covid-19 cases growing exponentially, Thais are more aware about the need for vaccination. Furthermore, the government has launched the new relief package focusing on reducing the debt burden in the long term such as a debt haircut for individuals and SMEs. 

DBSVS assumes that stocks in the energy and petrochemical sectors will profit as a result of the above highlights. Meanwhile, the SET Index this week is expected to move in the range between 1,540-1,560 points. 

There are a few issues to keep an eye on: 1) virus mutation and the efficacy of the Covid-19 vaccine against new variants, 2) hemp and cannabis plantation license progression, and 3) GDP data from developed countries.

Lastly, DBSVS recommended the following commodity plays:

 

PTTEP : “BUY” recommendation with a target price of ฿145.00/share, upside 22%

PTT Exploration and Production Public Company Limited (PTTEP) would directly benefit from the rise in oil prices. Forecasting a strong outlook in 2Q21 driven by Oman Block 61 project. 

Core profit in 2Q is expected to stand at 10.1 billion baht (+26%YoY, +167%QoQ) as a result of an increased investment in Oman Block 61 project. 

As demand recovered, OPEC+ expected to increase production by 2.14 million barrels per day over the next three months.

DBSVS estimated PTTEP’s full-year earnings to grow by 61% in 2021 and 23% in 2022. Meanwhile, DY in 2021-2022 would be 3.0% and 3.7%, respectively.

 

TOP : “BUY” recommendation with a target price of ฿68.00/share, upside 16%

DBSVS expects the GRM and petrochemical margin will remain positive for the next 3-6 months. This is a main driving force for Thai Oil Public Company Limited (TOP). The given target price of 68 baht was based on P/BV at 1.5x. 2021 net profit is projected at 8 billion baht.

However, high demand for refineries, especially from the Middle East, China, and India, poses a threat. 

 

PTTGC : “BUY” recommendation with a target price of ฿73.00/share, upside 8%

PTT Global Chemical Public Company Limited (PTTGC) is expected to have a solid operating result in 2Q21 buoyed by rising petrochemical prices and product spread stabilizes.. 

The tender offer for VNT (16.24% @ 39 baht) will strengthen PVC’s chain. The transaction is scheduled to be concluded by the end of this year.  

 

PTT : “BUY” recommendation with a target price of ฿51.00/share, upside 27%

DBSVS favors PTT Public Company Limited (PTT) since it is a fully integrated energy company and has good business diversification, with a healthy outlook in 2Q21. 2021 net profit is estimated at 91.6 billion baht (+153%YoY).