The Stock Exchange of Thailand (SET) Index opened marginally lower at 771.31 and headed straight south to an intra-day trough of 761.55, for a 1.29-per-cent decline, reflecting the report disseminated late on Monday.

The stock market closed at 763.88, with moderate turnover of Bt18.99 billion.

Thai Oil Plc (TOP) lost nearly 5 per cent to close at Bt68.50, PTT Exploration and Production Plc (PTTEP) was off 3.7 per cent at Bt130, PTT Plc fell almost 3 per cent to Bt260 and Thai Petrochemical Industry Plc (TPI) was down 2.40 per cent at Bt8.15.

PTT, PTTEP and TOP account for 24 per cent of the market's total capitalisation.

The sharp decline in the stock market could be blamed on news that all refineries would squeeze current GRMs by US$2 (Bt75) to $3 per barrel, said Wiriya Lappromrattana, assistant vice president of Kiatnakin Securities.

She said the selling spree in TPI stock ahead of today's Central Bankruptcy Court ruling on whether TPI would get back its solvency status had also dampened market sentiment.

PTT's refinery subsidiaries and affiliates are TOP, 49.54-per-cent owned by PTT; Rayong Refinery, wholly owned by PTT; Star Petroleum Refining, 36-per-cent owned by PTT; TPI, 30-per-cent owned by PTT; and Bangchak Petroleum Plc, 7-per-cent owned by PTT.

Kim Eng Securities (Thailand) Plc said a $3-per-barrel reduction in GRM would not hit PTT and TOP's earnings this year by much if the measure lasted only one to three months.

In the three-month scenario, PTT's net profit for this year would fall between Bt1.07 billion and Bt3.2 billion, and its fair value would slip to between Bt288 to Bt296 per share.

Kim Eng's forecast for PTT's net income this year is Bt77.3 billion.

Under the same scenario, TOP's earnings would decline between Bt763 million and Bt2.29 billion, and its fair value would fall to Bt65 to Bt72 per share.

Kim Eng assumed a GRM of $6.50 per barrel for this analysis.

For a 12-month reduction in its GRM, PTT would lose earnings of Bt12.82 billion, and its fair value would drop 16.67 per cent, from Bt300, its current value, to Bt250 per share.

Thai Oil would suffer the most under this scenario, since its refinery business contributes about 70 per cent of its bottom line, while PTT's refinery business only accounts for 13 per cent of its net income.

"The $3-per-barrel reduction in GRM for Thai Oil over 12 months would lead to a Bt9.15-billion drop in earnings. Its fair value would fall to Bt31 - down about 59 per cent from our current fair value estimate of Bt76 per share," said the broker.

"The GRM for PTT and TOP has reached very high levels of $9 to $10 per barrel. Even if they reduced margins by $3 per barrel, their GRM would remain high at $6 to $7 per barrel, in line with our 2006 assumptions. The $3-per-barrel cut in GRM would only mean both companies would not enjoy windfall profits from abnormally high margins."

Somchai Anektaweepon of Syrus Securities said yesterday's market was also showing a correction.

"Although profit-taking in energy heavyweights was triggered by declining global oil prices, it was also due to expensive valuations after recent sharp gains," he said.

Oranan Paweewun

The Nation