Table of Contents
Executive summary ............................................................................................. 3
Stock recommendations....................................................................................... 4
Sector valuations................................................................................................ 6
Historical valuations ........................................................................................... 8
Key investment risks ............................................................................................ 9
The refining cycle — not too cold; not too hot ....................................................... 10
1) Highly negative fuel oil margins.................................................................... 10
2) Relatively resilient oil product demand ........................................................... 12
3) Significant additions may be muted............................................................... 15
Revising regional supply-demand and margins forecast......................................... 16
2H09 weakness expected .............................................................................. 19
Paraxylene — surprising strength could persist ....................................................... 20
More balanced than previously anticipated ........................................................ 22
Raising PX margin estimates............................................................................. 24
M&A — setting a valuation floor......................................................................... 25
Long-term trends — tug of war............................................................................ 27
Key data........................................................................................................ 29
GS Holdings: Value at a bargain ....................................................................... 34
Initiate with BUY, PT W42,000 ....................................................................... 35
SK Energy: Multi-energy play: upgrade to BUY...................................................... 40
Simple refiner producing quasi-complex mix ....................................................... 41
SKE rising to new earnings platform .................................................................. 41
S-Oil Corporation: Less well positioned for refining uptick: upgrade to NEUTRAL.......... 48
Thai Oil: Flexible PX operator ............................................................................. 53
Upgrade to BUY, raise PT to Bt56 .................................................................... 54
PTT Aromatics: High leverage, high risk ............................................................... 57
Upgrade to BUY, raise PT to Bt28 .................................................................... 58
Formosa Petrochemical: Peak pricing, but mediocre earnings ................................... 61
Maintain REDUCE; Raising PT to NT$50 ........................................................... 62
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