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EXECUTIVE Q&A: ONE DISTRICT, ONE STATION THE GOAL FOR PTG
26 June 2014
PTG Energy Plc, the operator of PT Petrol Stations in the country, made its debut on the Stock Exchange of Thailand in May 2013. Chief executive Pitak Ratchakitprakarn discusses the company's outlook and strategy.
What is PTG's business model?
The core businesses of PTG are retailing and wholesaling of fuel through our PT petrol stations, which are Company-Owned-Company- Operated ('COCO'), and through PT petrol stations, which are Dealer-Owned-Dealer-Operated ('DODO'). We also provide fuel wholesaling to other fuel traders (jobbers) and industrial operators throughout Thailand. Today we have 800 stations in Thailand with our own truck fleet and tank farm logistic centers to ensure a timely delivery to our stations and our customers.
How does PTG manage its logistics and inventory so well?
There are two reasons, first, we currently have nine tank farms throughout Thailand, with a capacity of 200 million liters, within 200 km of each PT Petrol Station, which allow us to be ensure a delivery time within four hours and to maintain inventory levels of 2-3 days. The other reason is that we also have our own large fleet of trucks that is more cost-effective than outsourcing. These two reasons ensure that we can maximize our marketing margins and minimize our logistic costs.
What differentiates PTG from its competitors?
There are several factors, but the core reason is that PTG is smaller than its competitors; as a result, we are faster, more flexible, and focused purely on the retail side of business. For instance, all of our stations are on a lease contract, which allows us to set up and operate in a faster and more cost-effective manner. Our locations are not solely limited to the main roads of Thailand, we look for locations that connect the provinces and districts of Thailand. Also, the fact that we have our own large fleet of trucks and tank farms in all regions of Thailand keeps our logistic costs low. And, finally, our membership card system has shown a high growth with a total of 1.7 million members today.
Why did PTG decide to hold an IPO last year?
There were several reasons for the IPO. First of all, it would help raise capital, which we did for THB 1.6 billion, to further expand our business. Secondly, we wanted to improve our operations, and also would like to enhance our brand awareness. Today, not too many people in Bangkok are aware of our PT Petrol Stations because we are not prevalent in Bangkok. So, we would like to create a brand awareness for our company and we are glad to hear that not many people recognize our brand (us), or do but have never filled up at our stations before. So, we see this as an opportunity to attract new customers and the growth would be exponential. We have seen the benefits from this in our same-store-sales growth over the past 12 months.
How will PTG further improve its brand awareness?
Through a combination of marketing, expansion of stations, and utilizing of our membership base. On the two main highways of Thailand, we will have large-size station expansions. The first is in Khao Pho, an area that every vehicle has to pass through in order to go to the Southern part of Thailand, with an approximate area of 163 rais. The second is in Chinat, which is en route to the Northern part of Thailand and has an area of five rais. Our Max Card has been doing very well since its launch two years ago. We have invested heavily in IT system to improve our Customer Relationship Management, and since the launch, we have achieved the target of 1.7 million members at a rate of 100,000 new members per month. By the end of this year, we should have 2.6 million members. Currently, 63% of our business is from our members, and we maintain a close relationship with our members with special treat, such as sending them the birthday wishes via SMS.
What impact will the AEC have on your business?
We are seeing in increasing demand for petrol in Thailand, especially in the areas along the border with our neighboring countries. We already have several stations across the key border areas of Thailand that will benefit from AEC. As a company, we still continue to operate in Thailand for the time being because the market opportunity here is still plentiful.
What are the biggest risks faced by your business?
The main risks are generally out of our control. For example, if the economy slows down tremendously and road usage of vehicles decreases, then the industry as a whole will naturally be affected. On the other hand, if oil price becomes incredibly volatile on a short term basis, it will impact the industry as well. However, with our strategic locations and our inventory management capability, we are well prepared to mitigate these risks.
Where do you see PTG five years from now?
We will continue to expand our business with an increasing number of stations in Thailand by 200-300 locations per year, plus we will expand the types of petroleum products we offer as well. We see the power of our distribution network, and in the end, our aim is to have a PT station in every district in Thailand to serve people in every part of Thailand.