October 20, 2015 / 7:08 AM / 2 years ago

Junta's infrastructure spending gives Thai asphalt demand record push

GRAPHIC: Thai asphalt demand: link.reuters.com/nyh85w

By Khettiya Jittapong and Manunphattr Dhanananonphorn BANGKOK, Oct 20 (Reuters) - Thailand's military rulers are fortifying the economy from the ground up. State spending on infrastructure is driving asphalt demand to a record, with shares of the country's biggest supplier soaring more than 500 percent this year.

Domestic demand for asphalt products, used in road construction, may rise 10-15 percent to more than 900,000 tonnes this year, according to Tipco Asphalt (TASCO), the country's largest producer of the material. That would exceed the previous all-time high of 896,000 tonnes in 2012 when consumption surged due to reconstruction efforts following devastating floods in late 2011.

Demand for asphalt is expected to see robust growth over the next few years, underpinned by the government's push to expand road networks. A 126 billion baht ($3.57 billion) budget has been allocated to build highways and rural roads for fiscal year 2016, on top of 142 billion baht in 2015 and 97 billion baht in 2014. The junta also recently launched a stimulus package linked to small infrastructure projects.

Shares in TASCO have surged to almost 40 baht from around 6 baht at the beginning of the year, the best performer on the local stock market. TASCO, partly owned by Colas SA and Tipco Foods Pcl, posted record net profit in the second quarter, helped by its strong domestic network and success in Indonesia, China, Malaysia, Australia and Vietnam.

Risks include a slower-than-expected economic recovery in Thailand and globally and the prospect of a volatile oil market, which could push asphalt prices higher. Still, industry data shows global asphalt demand will increase 3.6 percent a year to 121 million tonnes by 2017, led by growth in Asia.

"We have revised up our 2015 earnings (for TASCO) to 5.06 billion baht," Surachai Pramualcharoenkit, an analyst at Maybank Kim Eng Securities, wrote in a note. "Earnings growth momentum will remain impressive over the next few years." ($1 = 35.3100 baht) (Editing by Ryan Woo)

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