Another high growth stock -at a tame valuation in a defensive sector.

Another high growth stock at a too cheap valuation.  Put this tiger in your tank. 

Last month I brought CHO to your attention which I wrote up briefly in our member lounge at 1.77.  As I was traveling I did not have much time to dig into it but glad I took it up as CHO rocketed up some 50% since to 2.56, and peaked not long after my mention at 2.90.  I am trying to visit this company at month-end but have not heard back from them so far. Since then, CHO will issue free deep in the money warrants (convertible at 0.50) and besides holding on those whom missed it just might want to nibble at this stock, despite its price rise.

Today, I want to bring to your keen attention another high charged growth stock by the symbol of PTG or PTG Energy Public Company.  PTG is just now trading around 4.10 and was brought public at the end of May at 3.90 -and sort of just held its own around these levels ever since.  This so despite the huge SET volatility (mega funds exiting emerging markets) after the US tinkered and then vacillated with its QE program.

This company is listed on the SET and trades in the “Energy & Utilities” sector and its web site is www.ptgenergy.co.th   Its trailing p/e is shown at 15 but that is misleading as PTG seems literally growing leaps and bounds.  The company shows 1.67 billion total shares outstanding, but listed.. well here is the summary as reported on May 30 2013:  

“The Company offers 420,000,000 newly issued shares to public, of which not more than 33,400,000 shares will be offered to the Company and it subsidiaries’ directors, executives and employees and 386,600,000 shares (including shares remain after offering to its subsidiaries’ directors, executives and employees) will be offered to general public.”

For a good and broad understanding I highly recommend you read their full IPO summary at this link below, check the first published SET news on PTG at:

http://www.set.or.th/set/companynews.do?symbol=PTG&language=en&country=US

PTG's full English language selling IPO memorandum is the first news given on May 28th, 2013.

Note how its petrol stations around Thailand have quadrupled in the past 3 years “COCO petrol station (stations)”  from around 100 to just about 400 by the IPO date.  As of June 30 the company had 630 stations.  As of September 26 they now reportedly have well over 700 stations.  (As reported by “Manager on line”). By next year they plan to open another 190 more. Wow.

Note also in a footnote on page 5:   “Sales by the Company and its subsidiaries totaled 391.78 million liters in 2009, growing to 558.23 million liters in 2010, 948.45 million liters in 2011 and 1,372.89 million liters in 2012.”   The table there also shows how some major players are losing market share.

PTG is also gearing up for more large oil ware houses on top of the nine areas they now have. The company has also stated some plans for renewable energy but I don’t have details on this yet.

We here in Thailand have noted the dramatic increase in cars over the recent past.  This on top of the double digit yearly increases which is the norm for years.  This is due to a massive government scheme late last year for a government rebate 100,000 Baht (3000 US$)  for any new first time car buyer.  This scheme has hugely successful.  New car loans go for 2.5 to 2.9% per year, just about as cheap as anywhere.  And since bank interest rates are and remain so low more and more consumers have opted to buy a nice car vs. earning near nothing in the banks.  Also, and don’t we know how the brokers are of little help, hence Thais savers have not yet in masses understood how to successful save/invest money in value stocks in Thailand….so they go on to buy condo’s, shop houses and yes nice cars!  

The demand for new gasoline stations is by no doubt a very stable high growth business now and into the forseable future.  And the relatively stability of global oil prices for some time and likely to continue stabilizes good to higher profit margins for innovative and high growth leaders like PTG.

I have noted for long how gasoline stations here are often jammed with waiting lines and then some pumps out of orders.  More then once I just drove back out, not wanting to put up with the wait -along with the some pumps out of order.  Gas stations which try harder will get more business!  

PTG does not buy the land to build new stations, it leases it for a shorter period of time 3-5 years, so to see first how successful the new location is -and to not tie up capital.  The company has good financial ratios due to its successful IPO launch at the height of the SET at the end of May. None of the major shareholders sold out any shares at the IPO.

There is one big insider sell transaction on June 21 of 25 mill. at 4 Baht, where the stock was trading then. But this sale does not show up in that day’s trading volume and there are numerous insider buys around this same date as well (at least 1 mill shares). This insider owns over 330 mill. shares and likely directly placed this block of shares with an eager institution asking for them. As such this does not bother me.

Here is the real reason I am excited:

The 2Q 2013 earnings report looked nothing less than explosive.  Revenues increased 28.4% and net profit 42.3%, this comparing the same Q to Q figures.  Fuel sales volume increased from 355 million liters to 464 million liters.  It increased the number of trucks from 180 as of June 30 last year to 299 as of June 30 this year.  Staff increased from 3187 employees to 5025 as of same Q to Q comparisons. These are all comparisons for Q 2, vs. Q2,  of  last year.   Either way and any way you look at this you can see the explosive growth rates this company is factually delivering and how this momentum will almost certainly result in much higher earnings in quarters to come.  

Their selling memorandum discuss as always risk concerns and these to me were well addressed and makes one feel fairly comfortable in believing PTG should have a p/e closer to 12-15 then its current 8.5!  Why not? As the company has a market cap of over 200 mill US$, according to this link below and its shares trade relatively well.

http://www.set.or.th/set/companyhighlight.do?symbol=PTG&language=en&country=US

Hence I can see PTG shares trading around 6-7 Baht by next year 2014.  PTG ‘s price to book is shown at 2.1 vs. the industry average of 1.5 but I don’t think this is very meaningful.  The sector it trades with an average p/e shown at 10.5 and that sectors’ average dividend yield is shown at 3.6% .  PTG which is clearly growing hugely faster then its sector is trading below both of these.  Why?   

The stock trades relatively well at 155 million Baht average per day, since its IPO.  This vs. 249 mill. Baht per day for Demco, just as a comparison. Note how PTG has not changed in value much since the SET market drop from May 30 and since reporting this explosive 2 Q. quarter,  i.e. showing how the company is expanding rapidly into the future.

I can see PTG earning 0.50 per share this year. (It earned 0.19 for the first 6 months of ’13.)   At 30% dividend payout ratio I expect a 0.15 Baht dividend early next year, yielding close to 4% which is rather good for such a high growth stock.

I welcome any comments as always. To me PTG at current levels looks like a very good growth stock in a defensive industry and at a tame valuation besides nice dividend. Hence I rate it with a buy view.

Best Regards,