Glow Energy
Net profit makes year's high in 3Q12 as expected
Glow Energy Plc (GLOW)
Q3 2012’s net profit skyrockets 244.6%qoq as expected from Gheco-one
GLOW reported 3Q12’s net profit at B1.88bn, growing magnificently by 224.6%qoq, close to our projection, due mainly to a commercial run of Gheco-one (GLOW holds 65% stake) since 26 July 2012. Accordingly, earnings in 3Q12 could revert to a net profit of B370m from a net loss of
B450m in 2Q12 from a penalty charge paid to EGAT. Moreover, the increasing profit in 3Q12 has also resulted from a profit of a cogeneration power plant that has grown 6.9%qoq to B770m due to spread that has almost doubled to B0.40/unit from B0.23/unit in 2Q12 for the natural gasfueled
and B1.77/unit from B1.45/unit in 2Q12 for the coal-fueled. The spread growth came from the government’s Ft rate hike by B0.30/unit in June 2012 and B0.18/unit in September despite decreasing electricity sale in September because of a maintenance shutdown of big customers such as Dow Chemical and VNT and a 1-month maintenance shutdown of CFB1 and
CFB3 power plants. Moreover, in 3Q12 the company also booked a FX gain of B550m from the Baht appreciation. Overall, 9M12’s net profit stood at B3.98bn, increasing 40.6% from the same period last year and accounting for 75% of FY2012’s earnings forecast.
Up 2012’s forecast to reflect extraordinary items. Norm profit to stabilize in Q4 2012
We revise up our net profit forecast for FY2012 by 8.5% to reflect the aforementioned
extraordinary items in 3Q12, but still maintain the norm profit forecast. Norm profit in 4Q12 is anticipated to stabilize close to that of 3Q12 due to the following reasons. 1) Profit from Gheco-one power plant is projected to increase after a commercial run for a full quarter. 2) Sale volume of the cogeneration power plant is projected to increase because in 4Q12 there will be a maintenance shutdown of only 1 power plant, CFB2, while the big customers that have undergone the maintenance shutdown would resume their operations again in 4Q12. These 2 supporting factors
would help compensate profits from GLOW IPP and Huay Ho power plant which are projected to weaken from 3Q12 because EGAT might order power plants to lower their operations as a low season is rounding the corner and they have reached a contract’s operation limit for the year.
Hold to receive dividend…PER is higher than the sectors’,upside is limited
We change to use 2013’s fair value at B75.25/share and recommend only “hold to receive dividend” as the share price has limited upside. Moreover, PER in 2012 is high at 19.6x and in spite of dropping to 13.4x in 2013, it is still higher than the sector’s average of around 11-12x. In addition, in the next 1-2 years there is not a project to create solid value as the company wants to decrease its current debt ratio of higher than 2x.
