1. Refinery THAILAND
C AP I T AL N O M U R A S E C U R I T I E S
Patcharin Karsemarnuntana Analyst Registration .No 17834
2 December 2008
662-285-0060 Ext. 3506 Patcharin.karsemarnuntana@th.nomura.com
SECTOR UPDATE
High risk despite cheap valuations
• 2009-10F net profit cut by 11-58% on weakening demand
BULLISH (U.R.)
Sector Rating
• 2009F fair value estimates slashed by 47-65%
Previous BULLISH
• Cheap valuations but threats to earnings remain
2009-10F net profit cut by 11-58% on weakening demand Share Price Performance
We revised down our 2008F earnings estimates TOP, PTTAR and IRPC sharply 1/12/08
1300
to reflect prospects that all three companies will once again report sizable losses 1200
1100
in 4Q08F. Our revised forecasts for 2008 call for PTTAR and IRPC to show a 1000
net loss for full-year 2008F. By contrast, TOP’s bottom line should remain in the 900
black for full-year 2008F even though it should still report a net loss for 4Q08F. 800
700
Meanwhile, we slashed our 2009-10F net profit forecasts for refinery operators 600
by 11-58% to take into account prospects for sharply lower operating rates 500
400
caused by the global economic crisis and the drastic narrowing of petrochemical 300
D J FM AM J J A SO N D J FM AM J J A S ON
spreads brought on by weakening demand. BANGKOK S.E.T. - PRICE INDEX
THAILAND SE ENERGY & UTILITIES - PRICE INDEX
2009F fair value estimates slashed by 47-65%
As a result of the downgrades to our earnings forecasts and the application of a
2009F EV/EBITDA of 5x for TOP and IRPC to be in line with the change made
previously to our EV/EBITDA target for PTTAR, we slashed our 2009F fair value
estimates for Thai refinery operators by 47-65%. Based on our revised fair
value estimates we downgraded our rating on TOP from Buy to NEUTRAL, as
well as switching our rating on IRPC from Neutral to REDUCE. By contrast, we
stand by our Neutral rating on PTTAR.
Cheap valuations but threats to earnings remain
Despite their cheap valuations (including EV/bbl valuations of only US$5,600-
8,200/bbl that represent discounts of 45-63% when compared with the pre-
inflation investment cost of a new refinery of US$15,000/bbl), we believe that
TOP, PTTAR and IRPC are unattractive at their current share price levels. The
cyclical peak for their gross refining margins (GRM) has now passed and their
profitability can only deteriorate as a result of the new refining capacity that is
due to come on stream from late 2008 up through 2012. Moreover, this situation
is likely to be compounded by a further decline in demand for refined oil
products. Of the three refinery operators under our coverage we believe that
TOP is the best-positioned due to the following: 1) its product yield is focused on
middle distillates where the crack spread should remain quite solid; 2) its
integrated cash cost is quite competitive at US$1.5/bbl; and 3) its Altman Z-score
for 2009F of 3.71 (vs. a 2009F Altman Z-score of less then 3.0x for its domestic
peers) suggests that TOP should be able to cope more effectively with both the
credit crunch and the economic downturn.
Earnings Forecasts and Valuations
09F TP Rating EV/bbl NP (THBmn) EPS (THB) EV/EBITDA (x) PER (x) Yield (%) ROE (%)
(THB) ($/bbl) 08F 09F 08F 09F 08F 09F 08F 09F 08F 09F 08F 09F
TOP 21.1 NEUTRAL 7,988 2,423 7,057 1.2 3.5 4.5 3.8 16.0 5.5 9.2 6.4 3.8 11.2
PTTAR 7.3 NEUTRAL 8,253 (3,594) 7,440 (1.2) 2.5 206.9* 5.0 nm. 3.1 - 9.8 (5.7) 12.0
IRPC 1.5 REDUCE 5,602 (2,514) 3,509 (0.1) 0.2 370.0* 5.9 nm. 10.4 5.3 2.9 (2.7) 3.8
Note: *low base EBITDA mainly due to stock loss and inventory mark-down
Source: CNS Research
Serial No. ENERGY 08-006 www.cnsrealtime.com
2. Refinery Sector Capital Nomura Securities
High risk despite cheap valuations
We revised down our 2008F net profit estimates for TOP, PTTAR and IRPC sharply to reflect
We revised down our 2008
prospects that all three companies will once again report sizable losses in 4Q08F. The dreadful
net profit estimates for
outlook for 4Q08F can be attributed to: 1) stock losses and inventory mark-downs, particularly on
TOP, PTTAR and IRPC to
their crude oil inventories; 2) the weakening of their GRMs as a result of their vulnerable crack
reflect prospects that all
spreads for gasoline and the sizeable negative spreads for naphtha over Dubai crude; 3)
three companies will once
abnormally low aromatics spreads caused by weak demand; and 4) the likelihood of lower
again report sizable losses
operating rates at both their refinery and petrochemical plants. Thus, our revised forecasts for
in 4Q08
2008 call for PTTAR and IRPC to show a net loss for full-year 2008. By contrast, TOP’s bottom
line should remain in the black even though it should report a net loss for 4Q08.
Meanwhile, we slashed our 2009-10F net profit forecasts for TOP, PTTAR and IRPC by 11-58% We also slashed our 2009-
to take into account prospects for sharply lower operating rates caused by the global economic 10F net profit forecasts for
crisis and the drastic narrowing of petrochemical spreads brought on by weakening demand. As refinery operators by
a result of these downgrades and the application of a 2009F EV/EBITDA of 5x for TOP and IRPC 11-58%
to be in line with the change made previously to our EV/EBITDA target for PTTAR, we slashed
our 2009F fair value estimates for Thai refinery operators by 47-65%. Based on our revised fair
value estimates we downgraded our rating on TOP from Buy to NEUTRAL, as well as switching
our rating on IRPC from Neutral to REDUCE. By contrast, we stand by our Neutral rating on
PTTAR.
Despite their cheap valuations (including EV/bbl valuations of only US$5,600-8,200/bbl that
Despite their cheap
represent discounts of 45-63% when compared with the pre-inflation investment cost of a new
valuations, in our view TOP,
refinery of US$15,000/bbl) in our view TOP, PTTAR and IRPC are unattractive at their current
PTTAR and IRPC are
share price levels. The cyclical peak for their gross refining margins (GRM) has now passed and
unattractive at their current
their profitability can only deteriorate as a result of the new refining capacity that is due to come
share price levels
on stream from late 2008 up through 2012. Moreover, this situation is likely to be compounded
by a further decline in demand for refined oil products. On this basis we expect the share prices
for refinery stocks to continue to underperform the SET.
TOP is the best-positioned
Of the three refinery operators under our coverage we believe that TOP is the best-positioned
to cope with the credit
due to the following: 1) its product yield is focused on middle distillates where the crack spread
crunch and the economic
should remain quite solid; 2) its integrated cash cost is quite competitive at US$1.5/bbl; and 3)
downturn
its Altman Z-score for 2009F of 3.71 (vs. a 2009F Altman Z-score of less then 3.0x for its
domestic peers) suggests that TOP should be able to cope more effectively with both the credit
crunch and the economic downturn.
Net profit estimates for 2009-10F slashed by 11-58%
We slashed our 2009-10F
As mentioned earlier, we slashed our 2009-10F earnings forecasts for TOP, PTTAR and IRPC
earnings forecasts for TOP,
by 11-58% to take into account prospects for sharply lower operating rates caused by the global
PTTAR and IRPC by 11-58%
economic crisis. The reductions in operating rates for their petrochemical plants are likely to
to take into account
between 15-21% vs. 5-10% for their refineries. Another reason for downgrades to our earnings
prospects for sharply lower
forecasts for 2009-10F is the likelihood of seeing a drastic narrowing of their petrochemical
operating rates caused by
spreads brought on by weakening demand. This is likely to be particularly true for their the global economic crisis
paraxylene spreads and benzene spreads owing to the slowdown in demand in their derivative
chains for polyester/PET and styrene monomer. Note that previously we already cut our 2009F
GRM forecasts for complex refineries to US$4/bbl to reflect the new refining capacity coming
stream that is likely to overwhelm additional demand.
2 December 2008 2
3. Refinery Sector Capital Nomura Securities
Exhibit 1. 4Q08 net profit estimates and revised Exhibit 2. Stock losses and inventory mark-downs
2008-10 net profit forecasts (above) and oil price movement (below)
TOP PTTAR IRPC Stock Loss and Inventory Mark-down (LCM)
Current (THBmn)
TOP PTTAR IRPC
0
Net Profit (THBmn)
9M08 8,617 2,215 2,323 -2,000
4Q08F (6,194) (5,808) (4,837) -4,000
2008F 2,423 (3,594) (2,514) -6,000
2009F 7,057 7,440 3,509 -8,000
2010F 10,834 9,670 3,799 -10,000
3Q08 4Q08F
Previous
Net Profit (THBmn) O il P r ic e M o v e m e n t
U S $ /b b l
170
2008F 10,794 2,721 9,010 W TI B re n t
150
2009F 10,438 9,953 8,290 D u b ai T a p is
130
2010F 13,114 10,832 8,388 110
90
% change 70
2008F -78% nm. nm. 50
2009F -32% -25% -58% 30
May-05
May-06
Oct-06
Feb-07
Oct-07
Jul-08
Nov-08
Jan-05
Sep-05
Jan-06
Jun-07
Feb-08
2010F -17% -11% -55%
Source: CNS Research Source: The Company, CNS Research
Note: stock loss is a realized loss on refining activity, while an inventory
mark-down is an unrealized loss on physical stocks in the quarter based on
the conservative accounting method by means of the lower of cost or
market (LCM)
Exhibit 3. Change in key assumptions and earnings revisions for 2009-10F
Thai Oil (TOP) Current Previous % change
Key assumption and earnings revision 2009F 2010F 2009F 2010F 2009F 2010F
Operating rate - refinery plant (%) 90% 95% 105% 105% -15% -10%
Operating rate - aromatics plant (%) 75% 80% 95% 95% -20% -15%
Operating rate - lube base plants (%) 85% 90% 95% 95% -10% -5%
Market GRM (US$/bbl) 4.0 5.0 4.0 5.0 0% 0%
Spread PX - Platformate (US$/tonne) 260 260 300 280 -13% -7%
Spread BZ - Platformate (US$/tonne) 130 130 150 130 -13% 0%
Spread LB - HSFO (US$/tonne) 450 450 450 450 0% 0%
EBITDA (THBmn) 16,049 19,935 19,674 23,243 -18% -14%
Net Profit (THBmn) 7,057 10,834 10,438 10,438 -32% 4%
PTT Aromatics and Refining (PTTAR) Current Previous % change
Key assumption and earnings revision 2009F 2010F 2009F 2010F 2009F 2010F
Operating rate - refinery plant (%) 90% 95% 105% 105% -15% -10%
Operating rate - aromatics plant (%) 75% 80% 95% 95% -20% -15%
Market GRM (US$/bbl) 4.0 5.0 4.0 5.0 0% 0%
PX - Condensate (US$/tonne) 280 280 300 280 -7% 0%
BZ - Condensate (US$/tonne) 150 150 150 130 0% 15%
EBITDA (THBmn) 15,715 18,555 18,766 20,487 -16% -9%
Net Profit (THBmn) 7,440 9,670 9,953 10,832 -25% -11%
IRPC (IRPC) Current Previous % change
Key assumption and earnings revision 2009F 2010F 2009F 2010F 2009F 2010F
Operating rate - refinery plant (%) 70% 80% 85% 85% -15% -5%
Operating rate - petrochemical plant (%) 82% 86% 103% 103% -21% -17%
Integrated GRM (US$/bbl) 6.1 5.3 8.2 8.0 -26% -33%
GRM of refinery business (US$/bbl) 3.1 3.0 4.2 4.2 -27% -28%
GRM of petrochemical and others business (US$/bbl) 3.0 2.3 4.0 3.8 -24% -39%
EBITDA (THBmn) 7,051 8,246 12,216 14,289 -42% -42%
Net Profit (THBmn) 3,509 3,799 8,290 8,388 -58% -55%
Source: CNS Research
2 December 2008 3
4. Refinery Sector Capital Nomura Securities
Exhibit 4. Movement of crude oil price Exhibit 5. Movement of aromatics price
US$/bbl US$/tonne
170 1,800
WTI Brent Paraxylene
1,600
150 Dubai Tapis Benzene
1,400
130
1,200
110
1,000
90
800
70 600
400
50
200
30
Jan-05
Oct-05
Apr-06
Oct-06
Jan-07
Apr-07
Aug-08
Apr-05
Jul-05
Jan-06
Jul-06
Aug-07
Nov-07
Feb-08
May-08
Nov-08
May-05
May-06
Oct-06
Feb-07
Oct-07
Jul-08
Nov-08
Jan-05
Sep-05
Jan-06
Jun-07
Feb-08
Source: DataStream Source: CNS Research
Sharp drop in 4Q08 Singapore Dubai crack being hit by lowering gasoline crack
For 4Q08 the QTD Singapore Dubai crack has averaged at US$4.1/bbl for a decline of 29% q-q For 4Q08 the QTD
from US$5.8 in 3Q08 and down 47% y-y from US$7.6 in 4Q07. The cause of this decline is the Singapore Dubai crack has
dwindling demand for gasoline led by weak consumption in the US. Note that gas consumption averaged at US$4.1/bbl
in the US accounts for 45% of global demand. This is the result of a sharp decline in the (-29% q-q and -47% y-y)
gasoline crack spread to US$4.6/bbl QTD from US$5.9/bbl in 3Q08 and US$12.6/bbl in 4Q07. In
addition, the abnormally low price of naphtha price so far this quarter has resulted in a negative
spread over Dubai crude that in turn is putting further pressure on refinery operators’ GRMs.
These negative signs imply extremely poor demand for petrochemicals and further cutbacks in
production by Asian naphtha-based crackers making the excess supply of naphtha on the
market. Note that the crack spreads for middle distillates have weakened but remain fairly solid.
For example, the crack spread for jet oil has narrowed to US$22.9/bbl QTD (vs. US$28.6 in
3Q08, and US$22.7 in 4Q07), while the crack spread for gas oil has weakened to US$16.6/bbl
QTD (vs. US$25.6 in 3Q08, and US$19.5 in 4Q07).
Exhibit 6. Singapore Dubai crack Exhibit 7. Crack spread by type of refined oil
US$/bbl
US$/bbl
40
10.0
ULG 95-Dubai Diesel - Dubai
9.0 30 Jet - Dubai FO180 - Dubai
8.0 20
7.0 10
6.0
0
5.0
-10
4.0
-20
3.0
-30
2.0
4Q05
1Q07
2Q08
1Q05
2Q05
3Q05
1Q06
2Q06
3Q06
4Q06
2Q07
3Q07
4Q07
1Q08
3Q08
4Q08 QTD
4Q08 QTD
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
Source: DataStream Source: CNS Research
Extremely weak demand putting pressure on aromatics spreads
So far the paraxylene-
Since the beginning of 4Q08 aromatics spreads have also dropped sharply. For example, QTD
condensate spread and the
the paraxylene-condensate spread and the benzene-condensate spread have dropped by 52%
benzene-condensate spread
q-q (to US$207/tonne) and by 89% q-q (to US$28/tonne), respectively. These declines have
for 4Q08 have dropped by
been caused by the sharp slowdown in demand for aromatics products caused by weak demand
2 December 2008 4
5. Refinery Sector Capital Nomura Securities
in the intermediate and downstream petrochemical chain brought on by the global economic 52% q-q and 89% q-q,
crisis. Buyers of petrochemical products are now destocking their inventory levels and delaying respectively
placing new orders. We expect this worse-than-usual trough situation for the petrochemical
industry to continue into 1Q09. However, this should be followed by the building up of new
inventory after several months of destocking.
On the cost side, given the greater market access to naphtha resulting from the production
cutbacks by naphtha-based crackers, the price of naphtha price is currently abnormally low at
just US$432/tonne, which is US$90/tonne cheaper than the price of condensate. This is unusual
because naphtha is usually more expensive than condensate. However, we expect this
abnormal situation will not last long and that it will take at most one quarter for conditions to
return to normal where the price of naphtha is US$30-50/tonne higher than the price of
condensate.
Exhibit 8. Paraxylene spread and benzene spread Exhibit 9. Condensate price vs. naphtha price
US$/tonne
US$/tonne
1,300
1,000
Condensate
1,200
Paraxylene Spread
1,100 Naphtha
800 Benzene Spread 1,000
900
600
800
700
400
600
500
200
400
300
0
200
100
-200
0
Jan-06
Jan-05
Apr-05
Jul-05
Oct-05
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Aug-07
Jan-05
May-08
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Aug-07
Aug-08
Nov-08
Nov-07
Feb-08
Source: DataStream Source: CNS Research
Low base effect in 2008F to bring about earnings recovery next year
In general, refinery operators are likely to report low to negative earnings for 2008F due to If we exclude the inventory
prospects for extremely weak results in 2H08F that should include huge net losses caused by mark-downs for this year,
substantial stock loss and inventory mark-downs following the sharp drop in the price of crude oil. the operating performance
Nevertheless, for full-year 2008 we expect TOP to post a net profit of THB2.4bn owing to its at TOP, PTTAR AND IRPC is
strong performance in 1H08 that included a solid GRM and a substantial stock gain made likely to deteriorate in 2009F
possible by the sharp rise in the price of crude oil (particularly in 2Q08), as well as the company’s given the anticipated
capacity expansion. By contrast, PTTAR and IRPC are likely to fall into the red for full-year 2008 downturn for both their
with net losses of THB3.6bn and THB2.5bn, respectively. GRMs and petrochemical
spreads
Due to the low base effect from 2008F TOP, PTTAR and IRPC should see their earnings
rebound in 2009F even though we revised down our net profit forecasts for 2009-10F. However,
if we exclude their inventory mark-downs for this year, their operating performance is likely to
deteriorate in 2009F given the anticipated downturn for both their GRMs and petrochemical
spreads. Note that PTTAR should be an exceptional case as its 2009F earnings are likely to be
supported by a full-year contribution from the commercial start-up of its new aromatics complex.
This facility is comprised of a reformer complex and aromatics complex that are likely to boost its
nameplate refining capacity by 65kbd to 280kbd (including its condensate splitter capacity of its
existing Aromatic I plant), as well as its nameplate aromatics capacity that should nearly double
to 2.23mn tpa.
2 December 2008 5
6. Refinery Sector Capital Nomura Securities
Exhibit 10. Comparison of 2008-10F net profit for TOP, PTTAR and IRPC
THBmn
12,000
10,000
8,000
6,000
4,000
2,000
0
TOP PTTAR IRPC
(2,000)
(4,000)
(6,000)
2008F 2009F 2010F
Source: CNS Research
2009F fair value estimates slashed by 47-65%
Our revised fair value
As a result of the downgrades to our earnings forecasts and the application of a 2009F
estimates for TOP, PTTAR
EV/EBITDA of 5x for TOP and IRPC to be in line with the change made previously to our
and IRPC are based on a
EV/EBITDA target for PTTAR, we slashed our 2009F fair value estimates for TOP, PTTAR and
IRPC by 47-65%. Based on our revised fair value estimates we downgraded our rating on TOP 2009F EV/EBITDA of 5x
from Buy to NEUTRAL, as well as switching our rating on IRPC from Neutral to REDUCE. By
contrast, we stand by our Neutral rating on PTTAR.
Exhibit 11. Fair value and change in ratings for TOP, PTTAR and IRPC
Rating 2009F Fair Price (THB) % chg Valuation Methodology
Current Previous Current Previous Current Previous
TOP NEUTRAL BUY 21.1 44.2 -52% 2009F EV/EBITDA: 5x SOTP
2009F EV/EBITDA: 5x
PTTAR NEUTRAL NEUTRAL 7.3 13.9 -47% 2009F EV/EBITDA: 5x
EV/EBITDA
2009F EV/EBITDA: 5x
IRPC REDUCE NEUTRAL 1.5 4.5 -65% DCF
EV/EBITDA
Source: CNS Research
Key risks to our revised earnings forecasts for 2009F
Although inventory mark-downs are likely to have less of an impact on refinery operators’ Risks to our newly revised
earnings for 2009F, there are several risks to our net profit estimates for that year. These earnings estimates for
include weaker-than-anticipated GRM and petrochemical spreads, as well as lower-than- 2009F include weaker-than-
expected operating rates brought on by sharper-than-anticipated declines in the demand for anticipated GRMs and
petroleum and petrochemical products caused by the global economic slowdown. petrochemical spreads, as
well as lower-than-expected
Despite their cheap valuations (including EV/bbl valuations of only US$5,600-8,200/bbl that operating rates
represent discounts of 45-63% when compared with the pre-inflation investment cost of a new
refinery of US$15,000/bbl), we believe that TOP, PTTAR and IRPC are unattractive at their
current share price levels. The cyclical peak for their gross refining margins (GRM) has now
passed and their profitability can only deteriorate as a result of the new refining capacity that is
due to come on stream from late 2008 up through 2012F. Moreover, this situation is likely to be
compounded by a further decline in demand for refined oil products. Note that Nomura
International Hong Kong’s (NIHK) energy research team calls for the addition of new crude
distillation capacity of 7mn bbl/d during 2008-12F, which would be equivalent to 1.5% CAGR
versus demand growth at 1% CAGR in the period. Furthermore, overcapacity is likely to be more
2 December 2008 6
7. Refinery Sector Capital Nomura Securities
persistent in the next 12 months as out-sized new capacity is set to come on-stream within a
relatively short timeframe. This is particularly true of Reliance Industries that will add 580kbd of
refining capacity in early 2009F, as well as the cumulative 840kbd of refining capacity that is
scheduled to come on stream from China in 2H08F-1H09F. Hence, due to the global economic
crisis the scope for an incremental improvement in demand is in doubt. All of these factors are
potential threats to our revised earnings forecasts for 2009F.
Of the three refinery
Of the three refinery operators under our coverage we believe that TOP is the best-positioned
operators under our
due to the following: 1) its product yield is focused on middle distillates where the crack spread
coverage we believe that
should remain quite solid; 2) its integrated cash cost is quite competitive at US$1.5/bbl; and 3)
TOP is the best-positioned
its Altman Z-score for 2009F of 3.71 (vs. a 2009F Altman Z-score of less then 3.0x for its
to cope with the credit
domestic peers) suggests that TOP should be able to cope more effectively with both the credit
crunch and global economic
crunch and the economic downturn.
slowdown
Exhibit 12. 2008-09F earnings forecast and valuation
09F TP Rating EV/bbl NP (THBmn) EPS (THB) EV/EBITDA (x) PER (x) Yield (%) ROE (%)
(THB) ($/bbl) 08F 09F 08F 09F 08F 09F 08F 09F 08F 09F 08F 09F
TOP 21.1 NEUTRAL 7,988 2,423 7,057 1.2 3.5 4.5 3.8 16.0 5.5 9.2 6.4 3.8 11.2
PTTAR 7.3 NEUTRAL 8,253 (3,594) 7,440 (1.2) 2.5 206.9* 5.0 nm. 3.1 - 9.8 (5.7) 12.0
IRPC 1.5 REDUCE 5,602 (2,514) 3,509 (0.1) 0.2 370.0* 5.9 nm. 10.4 5.3 2.9 (2.7) 3.8
Note: *low base EBITDA mainly due to stock loss and inventory mark-down
Source: CNS Research
Exhibit 13. Global CDU additions Exhibit 14. Incremental supply of refined oil
products less incremental demand
kbd
kbd
2,000
3,500 3.5%
3,000 3.0%
1,600
2,500 2.5%
2,000 2.0% 1,200
1,500 1.5%
800
1,000 1.0%
500 0.5%
400
0 0.0%
2007 2008F 2009F 2010F 2011F 2012F 2013F 0
2007 2008F 2009F 2010F 2011F 2012F 2013F
Global CDU additions (LHS) % addition (RHS)
Source: Nomura International (H.K.) Source: Nomura International (H.K.)
Exhibit 15. TOP’s product yield vs. peers and Thailand’s oil demand
100%
10%
11%
19%
80%
41% 45%
60%
52%
40% 12%
25%
9% 17%
20%
19% 15%
16%
5%
4%
0%
T O P (9 M0 8 ) O th e r R e fin e r y ' s T h a ila n d ' s O il D e m a n d
P r o d u c t Y ie ld
LP G G a s o lin e Jet D ie s e l FO
Source: TOP, CNS Research
2 December 2008 7
8. Refinery Sector Capital Nomura Securities
Exhibit 16. Altman Z-scores for TOP, PTTAR and IRPC
Stock 09F EBIT/TA 09F Net Sales /TA 09F Mkt Value of Equity/TL 09F WC/TA 09F RE/Total Assets 09F Z-Score
TOP 0.06 2.68 0.47 0.15 0.27 3.71
PTTAR 0.07 2.10 0.24 (0.06) 0.15 2.57
IRPC 0.03 1.62 0.69 0.36 0.31 2.97
Source: CNS Research
Note: Details of the Altman Z-core
RATIO WEIGHTAGE
A EBIT/Total Assets x. 3.3
B Net Sales /Total Assets x 0.999
C Market Value of Equity / Total Liabilities x 0.6
D Working Capital/Total Assets x 1.2
E Retained Earnings /Total Assets x1.4
These ratios are multiplied by the weightings indicated above, and the results are added together.
Z-Score = A x 3.3 + B x 0.99 + C x 0.6 + D x 1.2 + E x 1.4
2 December 2008 8
