PTG to Increase Value over Quantity Making a Turnaround Possible

Finally, PTG Energy PLC, or PTG, has adjusted their business plan, turning around towards “increasing value” over “increasing quantity”. Previously, the plan was to expand the number of PT petrol service station to 2,000 to create an Economy of Scale, become Thailand’s leader in quantity of gas stations, and overtake PTT as the leader.

Recently up to now, PTG’s branch expansion has been via COCO (Company Own Company Operate) format, which is basically where the petroleum supplier company solely invests and operates everything. Other brands on the other hand, opted for DODO (Dealer Own Dealer Operate), where the dealer invests and operates the service stations, or CODO (Company Own Dealer Operate), this is where the petroleum supplier invests in the service station and has a dealer operate the station.

(The reason for PTG’s choice to expand their branches by being the sole investor (COCO) is because they don’t want to repeat what happened during the 1997 crisis where dealers had invested and operated almost 400 stations, but when the crisis hit the dealers decamped and left PTG to face the problems head on.)

 

In parallel to PTG’s COCO approach, is the company’s Non-Oil business acquisitions, for example, Coffee World, Krua Ban Jitr (a ready to eat Thai curry with rice restaurant franchise), PRO TRUCK maintenance and repair service station for commercial transport trucks, and AUTOBACS maintenance and repair service for cars.

However, the vigorous expansion of stations has not led to revenue increments that is proportional to the increase of the branches. Whether this is due to the downturn of regional economic factors, or the purchasing power of farmers being stagnant, it has caused Mr. Pitak Rachakitprakarn, President and Chief Executive Officer of PTG, to declare the decreased adjustment of sales target. And shift branch expansion to only the areas with higher economic growth, where services can be thoroughly provided to customers, and where the tandem of Non-Oil businesses can fill in the gap by spreading out the revenue channel and help avoid the risks of having just one revenue source.

This has been the cause for the adjustment of station expansion target for this year to 1,900 branches from the original target of 2,000 branches.

 

Another point of interest is the Non-Oil businesses that have been heavily invested one, including: 1) The Food and Beverage business, Pan Thai Coffee Shop, Coffee World, and Krua Ban Jitr, 2) The Convenience Store business in the name of Max Mart, 3) The Engine Lubricant business under the brand PT Maxnitron, 4) The Auto Maintenance and Repair Service business with AUTOBACS and PRO TRUCK for big transport trucks.

The day that will prove whether these investments will be worthwhile in terms of profitability is still ahead. Of course, having Non-Oil businesses will undoubtedly add value to the gas service stations, but how much profit will these Non-Oil businesses actually generate?

That will be PTG’s next big trial that we must keep an eye on, and perhaps provide some moral support on.

 

LOL.