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081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
081202 Sector Update  Refinerydoc
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081202 Sector Update Refinerydoc

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  • 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
  • 9. Refinery Sector Capital Nomura Securities Financial statements : TOP Profit and Loss (THBmn) Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F 249,111 279,109 261,051 388,531 413,312 399,291 Revenue (225,703) (259,032) (235,450) (378,894) (402,123) (384,389) Cost of goods sold 23,408 20,077 25,601 9,637 11,189 14,901 Gross profit (964) (1,069) (1,769) (937) (1,155) (1,124) SG&A 22,444 19,008 23,831 8,700 10,034 13,777 EBIT 6,368 4,814 4,966 6,084 6,015 6,157 Depreciation & amortisation 28,812 23,821 28,797 14,785 16,049 19,935 EBITDA (2,152) (1,917) (1,728) (2,009) (1,138) (800) Interest expense 703 636 632 (3,058) 550 550 Other income 20,994 17,727 22,736 3,634 9,446 13,527 Pre-tax profit (loss) (3,406) (3,203) (5,308) (450) (1,574) (2,725) Income tax 17,588 14,524 17,428 3,184 7,872 10,802 After-tax profit (loss) (1,032) 3,570 2,150 (376) (437) 432 Forex gain (loss) 2,573 393 - - - - Other extraordinary Items - (1) (1) (11) - - Gn (Ls) from affiliates (375) (827) (402) (373) (378) (400) Minority interests 18,753 17,659 19,176 2,423 7,057 10,834 Net profit (loss) 17,213 13,696 17,026 2,800 7,494 10,402 Normalised net profit (loss) 9.19 8.66 9.40 1.19 3.46 5.31 Reported EPS (THB) Balance Sheet (THBmn) 2005 2006 2007 2008F 2009F 2010F As at 31 Dec Cash & short-term Investments 11,673 6,982 4,760 4,424 4,645 4,877 Accounts receivable 17,805 18,754 22,961 37,256 39,633 38,288 Inventories 19,001 20,656 32,802 36,332 38,560 36,859 Other current assets 2,520 2,566 2,075 1,813 1,560 1,345 Total current assets 50,999 48,958 62,598 79,825 84,397 81,370 Fixed assets 71,301 59,294 71,440 69,199 67,281 65,136 Other assets 1,869 2,073 2,532 2,535 2,565 2,595 Total assets 124,169 110,324 136,570 151,559 154,244 149,101 Accounts payable 13,527 12,937 26,050 34,049 36,136 34,542 Short-term debt 0 1,000 350 0 0 0 Current portion of LT loans 1,616 1,133 1,100 5,102 7,753 4,995 Other current liabilities 4,930 3,958 4,737 16,896 20,331 15,896 Total current liabilities 20,073 19,029 32,237 56,047 64,220 55,434 Long-term loans 34,252 29,319 30,741 27,469 18,592 13,542 Other liabilities 2,992 1,811 1,754 1,560 1,638 1,719 Total liabilities 57,316 50,158 64,733 85,075 84,450 70,696 Paid-up capital 20,400 20,400 20,400 20,400 20,400 20,400 Share premium 2,456 2,456 2,456 2,456 2,456 2,456 Retained earnings 23,831 30,768 42,246 36,518 39,451 47,662 Other adjustments 16,579 2,285 2,285 2,285 2,285 2,285 Total equity 63,266 55,909 67,387 61,659 64,592 72,803 Minority Interest 3,586 4,257 4,450 4,824 5,202 5,602 Total liabilities and equity 124,169 110,324 136,570 151,559 154,244 149,101 Source: TOP, CNS 2 December 2008 9
  • 10. Refinery Sector Capital Nomura Securities Cashflow (THBmn) Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F Net Profit 18,753 17,659 19,176 2,423 7,057 10,834 Forex & other extraordinary adjustment 1,032 (3,570) (2,150) 376 437 (432) Depreciation & amortization 6,368 4,814 4,966 6,084 6,015 6,157 Net change in working capital & others (5,629) (2,489) (354) (9,428) (1,881) 2,383 Net operating cash flows 20,524 16,414 21,638 (544) 11,627 18,943 Net capital expenditure (5,030) 7,149 (17,230) (3,816) (4,098) (4,012) Free cash flow 15,494 23,563 4,408 (4,359) 7,530 14,931 Other items (225) 2,006 731 149 121 710 Dividend paid (3,301) (6,556) (5,538) (8,151) (4,125) (2,623) Equity issue (1,857) (19,288) (2,563) (384) (378) (400) (Increase)/ Decrease in net debt 10,111 (275) (2,961) (12,746) 3,148 12,618 Net cash / (Debt) at beginning (34,305) (24,195) (24,470) (27,431) (40,176) (37,028) (Increase) / Decrease in net debt 10,111 (275) (2,961) (12,746) 3,148 12,618 Net Cash / (Debt) at ending (24,195) (24,470) (27,431) (40,176) (37,028) (24,410) Valuation and Ratio Analysis Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F Per Share (THB) EPS 9.19 8.66 9.40 1.19 3.46 5.31 DPS 3.50 3.50 4.50 1.75 1.21 1.86 BVPS 31.01 27.41 33.03 30.22 31.66 35.69 EV 30.86 30.99 32.45 32.80 29.64 25.70 Multiplier (x) PER 2.1 2.2 2.0 16.0 5.5 3.6 P/BV 0.6 0.7 0.6 0.6 0.6 0.5 EV/EBITDA 2.2 2.7 2.3 4.5 3.8 2.6 Dividend yield (%) 18.4 18.4 23.7 9.2 6.4 9.8 Growth (%) Sales growth 34.8 12.0 (6.5) 48.8 6.4 (3.4) EBITDA growth 14.9 (17.3) 20.9 (48.7) 8.6 24.2 Normalised profit growth 20.0 (20.4) 24.3 (83.6) 167.7 38.8 Net profit growth 24.4 (5.8) 8.6 (87.4) 191.2 53.5 EPS growth 24.4 (5.8) 8.6 (87.4) 191.2 53.5 Profitability Ratio (%) Gross margin 9.4 7.2 9.8 2.5 2.7 3.7 EBITDA margin 11.6 8.5 11.0 3.8 3.9 5.0 EBIT margin 9.0 6.8 9.1 2.2 2.4 3.5 Net margin 7.5 6.3 7.3 0.6 1.7 2.7 ROE 33.3 29.6 31.1 3.8 11.2 15.8 ROA 15.7 15.1 15.5 1.7 4.6 7.1 ROCE 21.6 20.8 22.8 9.1 11.1 14.7 Asset Utilization (x) Fixed asset turnover 3.5 4.3 4.0 5.5 6.1 6.0 Receivable turnover 18.0 15.3 12.5 12.9 10.8 10.2 Inventory turnover 12.3 13.1 8.8 11.0 10.7 10.2 Payable turnover 18.2 19.6 12.1 12.6 11.5 10.9 Liquidity ratio (x) Current ratio 2.5 2.6 1.9 1.4 1.3 1.5 1.5 1.4 0.9 0.7 0.7 0.8 Quick ratio Leverage ratios (x) Liabilities / equity 0.9 0.9 1.0 1.4 1.3 1.0 Interest-bearing debt / equity 0.6 0.6 0.5 0.5 0.4 0.3 Interest coverage 10.4 9.9 13.8 4.3 8.8 17.2 Debt service coverage 7.6 5.9 9.1 2.1 1.8 3.4 Source: TOP, CNS 2 December 2008 10
  • 11. Refinery Sector Capital Nomura Securities Financial statements : PTTAR Profit and Loss (THBmn) Year-end 31 Dec 2006 2007 2008F 2009F 2010F 248,585 253,709 254,324 329,198 355,670 Revenue (234,072) (229,066) (255,787) (316,943) (340,788) Cost of goods sold 14,513 24,643 (1,463) 12,255 14,882 Gross profit (1,358) (1,579) (1,072) (1,874) (2,062) SG&A 13,154 23,064 (2,535) 10,381 12,820 EBIT 3,064 2,843 2,903 5,335 5,735 Depreciation & amortisation 16,218 25,907 367 15,715 18,555 EBITDA (1,866) (1,198) (1,164) (1,634) (1,457) Interest expense 367 259 (1,536) 220 220 Other income 11,656 22,125 (5,235) 8,967 11,583 Pre-tax profit (loss) (1,271) (5,386) 1,503 (1,449) (1,992) Income tax 10,385 16,739 (3,733) 7,518 9,591 After-tax profit (loss) 2,933 1,369 271 (77) 79 Forex gain (loss) - - - - - Other extraordinary Items (69) (90) (132) - - Gn (Ls) from affiliates - - - - - Minority interests 13,248 18,018 (3,594) 7,440 9,670 Net profit (loss) 10,316 16,650 (3,864) 7,518 9,591 Normalised net profit (loss) 4.47 6.08 (1.21) 2.51 3.26 Reported EPS (THB) Balance Sheet (THBmn) 2006 2007 2008F 2009F 2010F As at 31 Dec Cash & short-term Investments 10,203 2,764 2,902 3,047 3,199 Accounts receivable 17,674 21,999 20,903 27,057 29,233 Inventories 14,507 22,327 21,024 26,050 28,010 Other current assets 1,925 1,314 1,217 1,303 1,426 Total current assets 44,308 48,403 46,046 57,458 61,868 Fixed assets 62,987 78,375 92,279 97,397 96,565 Other assets 6,802 4,439 2,137 2,129 2,122 Total assets 114,097 131,218 140,461 156,984 160,556 Accounts payable 14,305 21,223 24,528 30,392 32,678 Short-term debt 0 2,500 26,143 32,603 29,934 Current portion of LT loans 2,729 2,153 3,094 2,224 2,763 Other current liabilities 5,793 5,662 1,822 1,683 1,557 Total current liabilities 22,827 31,538 55,587 66,901 66,932 Long-term loans 35,566 31,134 26,805 24,573 20,700 Other liabilities 50 36 0 0 0 Total liabilities 58,443 62,709 82,392 91,474 87,632 Paid-up capital 29,633 29,636 29,636 29,636 29,636 Share premium 4,587 4,613 4,613 4,613 4,613 Retained earnings 18,850 25,889 15,449 22,889 30,304 Other adjustments 2,583 8,371 8,371 8,371 8,371 Total equity 55,654 68,509 58,069 65,509 72,924 Minority Interest 0 0 0 0 0 Total liabilities and equity 114,097 131,218 140,461 156,984 160,556 Source: PTTAR, CNS 2 December 2008 11
  • 12. Refinery Sector Capital Nomura Securities Cashflow (THBmn) Year-end 31 Dec 2006 2007 2008F 2009F 2010F Net Profit 13,248 18,018 (3,594) 7,440 9,670 Forex & other extraordinary adjustment (2,933) (1,369) (271) 77 (79) Depreciation & amortization 3,064 2,843 2,903 5,335 5,735 Net change in working capital & others 1,414 (4,657) 2,362 (5,619) (2,019) Net operating cash flows 14,793 14,836 1,401 7,233 13,307 Net capital expenditure (1,940) (18,906) (16,674) (10,453) (4,904) Free cash flow 12,854 (4,070) (15,274) (3,220) 8,403 Other items 375 4,392 2,135 8 7 Dividend paid (1,453) (2,836) (6,846) 0 (2,255) Equity issue (1,573) (2,417) (132) (0) 0 (Increase)/ Decrease in net debt 10,202 (4,931) (20,117) (3,212) 6,155 Net cash / (Debt) at beginning (38,295) (28,093) (33,024) (53,140) (56,352) (Increase) / Decrease in net debt 10,202 (4,931) (20,117) (3,212) 6,155 Net Cash / (Debt) at ending (28,093) (33,024) (53,140) (56,352) (50,197) Valuation and Ratio Analysis Year-end 31 Dec 2006 2007 2008F 2009F 2010F Per Share (THB) EPS 4.47 6.08 (1.21) 2.51 3.26 DPS 1.29 2.50 - 0.75 0.98 BVPS 18.78 23.12 19.59 22.10 24.61 EV 17.18 18.84 25.63 26.71 24.64 Multiplier (x) PER 1.7 1.3 nm. 3.1 2.4 P/BV 0.4 0.3 0.4 0.3 0.3 EV/EBITDA 3.1 2.2 206.9 5.0 3.9 Dividend yield (%) 16.7 32.5 - 9.8 12.7 Growth (%) Sales growth na. 2.1 0.2 29.4 8.0 EBITDA growth na. 59.7 (98.6) 4,179.8 18.1 Normalised profit growth na. 61.4 nm. nm. 27.6 Net profit growth na. 36.0 nm. nm. 30.0 EPS growth na. 36.0 nm. nm. 30.0 Profitability Ratio (%) Gross margin 5.8 9.7 (0.6) 3.7 4.2 EBITDA margin 6.5 10.2 0.1 4.8 5.2 EBIT margin 5.3 9.1 (1.0) 3.2 3.6 Net margin 5.3 7.1 (1.4) 2.3 2.7 ROE 47.6 29.0 (5.7) 12.0 14.0 ROA 23.2 14.7 (2.6) 5.0 6.1 ROCE 14.4 23.1 (3.0) 11.5 13.7 Asset Utilization (x) Fixed asset turnover 7.9 3.6 3.0 3.5 3.7 Receivable turnover 28.1 12.8 11.9 13.7 12.6 Inventory turnover 32.3 12.4 11.8 13.5 12.6 Payable turnover 32.7 12.9 11.2 11.5 10.8 Liquidity ratio (x) Current ratio 1.9 1.5 0.8 0.9 0.9 1.2 0.8 0.4 0.4 0.5 Quick ratio Leverage ratios (x) Liabilities / equity 1.1 0.9 1.4 1.4 1.2 Interest-bearing debt / equity 0.7 0.5 1.0 0.9 0.7 Interest coverage 7.1 19.3 (2.2) 6.4 8.8 Debt service coverage 3.5 4.4 0.0 0.4 0.5 Source: PTTAR, CNS 2 December 2008 12
  • 13. Refinery Sector Capital Nomura Securities Financial statements : IRPC Profit and Loss (THBmn) Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F 187,132 205,360 227,518 233,197 236,120 233,922 Revenue (159,615) (196,246) (212,711) (231,665) (227,742) (224,425) Cost of goods sold 27,517 9,114 14,807 1,532 8,378 9,497 Gross profit (14,659) (4,120) (5,458) (4,518) (4,722) (4,678) SG&A 12,858 4,994 9,349 (2,986) 3,656 4,819 EBIT 3,002 2,936 2,948 3,116 3,395 3,428 Depreciation & amortisation 15,860 7,930 12,297 130 7,051 8,246 EBITDA (3,118) (2,080) (1,107) (1,378) (1,650) (1,650) Interest expense 442 1,500 1,318 1,254 1,818 700 Other income 10,181 4,415 9,560 (3,110) 3,823 3,868 Pre-tax profit (loss) (24) (32) (31) (68) (56) (50) Income tax 10,157 4,383 9,528 (3,178) 3,766 3,818 After-tax profit (loss) (2,032) 2,451 1,265 453 (238) - Forex gain (loss) 53,766 - 2,207 237 - - Other extraordinary Items 18 - - (14) - - Gn (Ls) from affiliates - (11) (14) (11) (20) (20) Minority interests 61,909 6,823 12,986 (2,514) 3,509 3,799 Net profit (loss) 10,175 4,372 9,515 (3,203) 3,747 3,799 Normalised net profit (loss) 3.17 0.35 0.67 (0.13) 0.18 0.19 Reported EPS (THB) Balance Sheet (THBmn) 2005 2006 2007 2008F 2009F 2010F As at 31 Dec Cash & short-term Investments 14,704 17,642 12,673 17,762 24,392 29,539 Accounts receivable 7,940 6,705 13,315 12,778 9,704 9,613 Inventories 30,316 30,697 38,364 41,255 37,437 36,892 Other current assets 7,955 7,998 3,980 4,222 4,509 4,838 Total current assets 60,915 63,042 68,331 76,018 76,041 80,881 Fixed assets 63,601 61,388 62,311 64,740 67,128 64,831 Other assets 3,762 3,398 2,533 2,458 2,395 2,342 Total assets 128,277 127,828 133,175 143,216 145,564 148,054 Accounts payable 9,225 9,127 17,062 19,041 18,719 18,446 Short-term debt 1,818 32,945 1,266 1,146 1,038 941 Current portion of LT loans 4,503 6 21 0 0 0 Other current liabilities 2,714 2,763 3,427 3,545 3,695 3,877 Total current liabilities 18,260 44,840 21,776 23,732 23,452 23,264 Long-term loans 33,436 21 18,527 28,219 28,442 28,442 Other liabilities 270 14 96 0 0 0 Total liabilities 51,966 44,875 40,399 51,951 51,894 51,706 Paid-up capital 19,500 19,500 19,500 19,500 19,500 19,500 Share premium 27,576 27,356 26,767 26,798 26,798 26,798 Retained earnings 29,462 35,885 44,640 43,087 45,472 48,131 Other adjustments (227) 173 1,821 1,821 1,821 1,821 Total equity 76,311 82,914 92,728 91,205 93,590 96,249 Minority Interest 0 40 49 60 79 99 Total liabilities and equity 128,277 127,828 133,175 143,216 145,564 148,054 Source: IRPC, CNS 2 December 2008 13
  • 14. Refinery Sector Capital Nomura Securities Cashflow (THBmn) Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F Net Profit 61,909 6,823 12,986 (2,514) 3,509 3,799 Forex & other extraordinary adjustment 2,032 (2,451) (1,265) (453) 238 0 Depreciation & amortization 3,002 2,936 2,948 3,116 3,395 3,428 Net change in working capital & others (37,054) 5,129 (99) (21) 5,992 236 Net operating cash flows 29,889 12,436 14,571 128 13,134 7,462 Net capital expenditure (68,666) (464) (2,153) (5,529) (5,770) (1,120) Free cash flow (38,777) 11,973 12,417 (5,401) 7,363 6,342 Other items (696) (2,018) (1,043) (26) 294 62 Dividend paid 0 0 (1,499) (4,286) 961 (1,124) Equity issue 14,420 (231) (1,686) 5,252 (2,105) (35) (Increase)/ Decrease in net debt (25,053) 9,723 8,188 (4,461) 6,514 5,244 Net cash / (Debt) at beginning - (25,053) (15,330) (7,141) (11,603) (5,089) (Increase) / Decrease in net debt (25,053) 9,723 8,188 (4,461) 6,514 5,244 Net Cash / (Debt) at ending (25,053) (15,330) (7,141) (11,603) (5,089) 155 Valuation and Ratio Analysis Year-end 31 Dec 2005 2006 2007 2008F 2009F 2010F Per Share (THB) EPS 3.17 0.35 0.67 (0.13) 0.18 0.19 DPS - 0.12 0.30 0.10 0.05 0.06 BVPS 3.91 4.25 4.76 4.68 4.80 4.94 EV 3.15 2.66 2.24 2.47 2.13 1.86 Multiplier (x) PER 0.6 5.3 2.8 nm. 10.4 9.6 P/BV 0.5 0.4 0.4 0.4 0.4 0.4 EV/EBITDA 3.9 6.5 3.5 370.0 5.9 4.4 Dividend yield (%) - 6.4 16.0 5.3 2.9 3.1 Growth (%) Sales growth 21.1 9.7 10.8 2.5 1.3 (0.9) EBITDA growth (27.4) (50.0) 55.1 (98.9) 5,327.8 17.0 Normalised profit growth (13.5) (57.0) 117.6 nm. nm. 1.4 Net profit growth 404.0 (89.0) 90.3 nm. nm. 8.3 EPS growth 1,928.6 (89.0) 90.3 nm. nm. 8.3 Profitability Ratio (%) Gross margin 14.7 4.4 6.5 0.7 3.5 4.1 EBITDA margin 8.5 3.9 5.4 0.1 3.0 3.5 EBIT margin 6.9 2.4 4.1 (1.3) 1.5 2.1 Net margin 33.1 3.3 5.7 (1.1) 1.5 1.6 ROE 128.1 8.6 14.8 (2.7) 3.8 4.0 ROA 45.0 5.3 10.0 (1.8) 2.4 2.6 ROCE 11.7 6.0 8.4 (2.5) 3.0 3.9 Asset Utilization (x) Fixed asset turnover 2.4 3.3 3.7 3.7 3.6 3.5 Receivable turnover 26.7 28.0 22.7 17.9 21.0 24.2 Inventory turnover 5.9 6.4 6.2 5.8 5.8 6.0 Payable turnover 21.4 21.4 16.2 12.8 12.1 12.1 Liquidity ratio (x) Current ratio 3.3 1.4 3.1 3.2 3.2 3.5 1.2 0.5 1.2 1.3 1.5 1.7 Quick ratio Leverage ratios (x) Liabilities / equity 0.7 0.5 0.4 0.6 0.6 0.5 Interest-bearing debt / equity 0.5 0.4 0.2 0.3 0.3 0.3 Interest coverage 4.1 2.4 8.4 (2.2) 2.2 2.9 Debt service coverage 1.7 0.2 5.1 0.1 2.6 3.2 Source: IRPC, CNS 2 December 2008 14
  • 15. Refinery Sector Capital Nomura Securities Explanation of Nomura rating system for Asian companies under coverage ex Japan: Stocks: Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price) / Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst’s assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn’t think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. • A Strong Buy recommendation indicates that upside is more than 20%. • A Buy” recommendation indicates that upside is between 10% and 20%. • A Neutral recommendation indicates that upside or downside is less than 10%. • A Reduce recommendation indicates that downside is between 10% and 20%. • A Sell recommendation indicates that downside is more than 20%. Sectors: A Bullish rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A Neutral rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A Bearish rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation. DISCLAIMERS: This publication contains material that has been prepared by Capital Nomura Securities Public Co., Ltd., Bangkok, Thailand. This material is (i) for your private information, and we are not soliciting any action based upon it; (ii) not to be construed as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal; and (iii) is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Opinions expressed are current opinions as of the date appearing on this material only and the information, including the opinions contained herein are subject to change without notice. We, or other affiliates and/or subsidiaries of Nomura Holdings, Inc. (collectively referred to as the “Nomura Group”) may from time to time perform investment banking or other services (including acting as advisor, manager or lender) for, or solicit investment banking or other business from, companies mentioned herein. We, the Nomura Group, our or any of their officers, directors and employees, including persons involved in the preparation or issuance of this material may, from time to time, have long or short positions in, and buy or sell (or make a market in), the securities, or derivatives (including options) thereof, of companies mentioned herein. We, or a member of the Nomura Group, our or any of their officers, directors and employees may, to the extent it is permitted by applicable law, have acted upon or used this material, prior to or immediately following its publication. The securities described herein may not have been registered under the U.S. Securities Act of 1933, and, in such case, may not be offered or sold in the United States or to U.S. persons unless they have been registered under such Act, or except in compliance with an exemption from the registration requirements of such Act. Unless governing law permits otherwise, you must contact a Nomura Group entity in your home jurisdiction if you want to use our services in effecting a transaction in the securities mentioned in this material. This publication is intended for investors who are not private or expert investors within the meaning of the Rules of the Securities and Futures Authority Limited, and should not, therefore, be redistributed to private or expert investors. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without CNS’ prior written consent. Further information on any of the securities mentioned herein may be obtained upon request. If this publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request a hard-copy version. 2 December 2008 15

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