Though the acquisition will increase the company's retail oil network, the acquisition will not increase Thailand's largest oil and gas firm's earnings significantly, given that its oil business now contributes only slightly to its consolidated net profit, according to Seamico Securities.

The securities company said in a note yesterday that the acquisition would help increase PTT's overall sales by only 2 per cent on the back of a 2.6-per-cent market share of Jet's petrol stations.

PTT now has about 2,000 petrol stations with a market share of around 34 per cent. "The net-profit contribution will be insignificant as about 6 to 7 per cent of earnings before interest, tax, depreciation and amortisation (EBITDA) comes from its oil businesses, mostly from oil trading," the broker said.

Seamico Securities said the Bt50-million per station acquisition was overvalued if it did not include the land plots.

"Since the retail oil business has low margins, we expect Jet to have an insignificant impact on PTT's consolidated net profit," the broker stated.

However, Seamico Securities continues to recommend "buy" on PTT's stock as its current share price is lower than the brokerage's 2007 fair value estimate of Bt240.

PTT last year enjoyed a net profit of Bt95.26 billion, up from Bt85.52 billion in the previous year. The company has said that its consolidated sales revenue in 2006 amounted to Bt1.21 trillion, up by 31.1 per cent year on year or Bt287.72 billion. Its EBITDA in 2006 rose 25.1 per cent, or Bt28.63 billion, to Bt142.68 billion.

Kim Eng Securities (Thailand) also recommends investors snap up PTT's stock. However, the broker has revised downward its fair value estimate for PTT's stock for this year from Bt272 to Bt264.

It predicted that PTT's net profit this year would fall by 16 per cent to Bt79.59 billion due to no extra gains and plant shutdowns of its two affiliates - PTT Chemical and Thai Oil - for maintenance.

PTT's earnings next year are expected to grow 7 per cent on year to Bt85.05 billion, based on no major shutdowns in affiliate companies, higher utilisation of gas pipelines, with phase two coming online in 2008, and ongoing growth in the gas business.

The broker also expects PTT to achieve a marketing margin of Bt0.4 to Bt0.5 per litre this year due to reduced volatility in global oil prices.

Despite the low marketing margin, the impact on PTT's bottom line is small. Although the oil business contributed revenues of 71 per cent of total sales, it generates a small EBITDA. This is well below EBITDA contributions of 45 per cent from PTT Exploration and Production (PTTEP) and 31 per cent from the gas business.

PTT owns 66.52 per cent of PTTEP.

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