Glow Energy

Glow Energy Plc (GLOW)

2Q13 net profit down 51.1%qoq due to Fx loss
GLOW reported 2Q13 net profit at B1.22bn, falling 51.1%qoq mainly from a Fx loss
of B892m from the Baht weakness because Gheco-One has USD debt of as much as
US$400m. Excluding the item, the norm profit decreased only 5.8%qoq to B1.9bn.
Despite a 48-day (18 May – 5 July 2013) maintenance shutdown of Gheco-One
(GLOW holds 65% stake) for a warranty inspection, the earnings in 2Q13 still stood
close to that of 1Q13 at around B400m because of a positive factor, which is
recognition of extraordinary income of B170m from a change of capacity charge on
seasonal effect that has been postponed from 1Q13 to this quarter. Moreover, a
profit from Huay Ho and GLOW IPP power plants in 2Q13 has almost doubled from
1Q13 to B100m and B470m, respectively, thanking to increasing capacity of Huay
Ho and increasing income of GLOW IPP as a result of the Baht depreciation. At the
same time, earnings from the co-gen power plant declined around 16.8%qoq to
B1.2bn because of a technical problem of CFB3 power plant that resulted in a lower
utilization rate from 90% to 80%. Moreover, gross margin from power selling would
decrease slightly following Ft in May-August that has dropped by B0.05/KWh,
depressing margin of gas and coal power plants by 1.85%qoq and 2.38%qoq to
B0.53/KWh and B2.05/KWh, respectively. Overall, 1H13 net profit was recorded at
B3.7bn, increasing 82% from the same period last year and representing 47% of
our FY2013 forecast.
- 2H13 to grow from 1H13. Full-year growth expected at 41%yoy
We maintain our forecast, projecting the norm profit in 2H13 to grow from 1H13
because Gheco-One would increase its utilization rate from 1H13 in which there
were a technical problem and a month and a half maintenance shutdown for
warranty inspection. Although the power plant has resumed its utilization rate since
6 July, there was a problem at the heater so it still could not operate at a full
capacity, but only 75% or around 500 MW of the total 660 MW. Nevertheless, the
overall utilization rate would still be higher than that of 1H13. Preliminarily, we
project the heater maintenance to take around 1-2 months, while other power
plants would operate at a full capacity without maintenance shutdown plans.
Accordingly, overall, we estimate FY2013 net profit with the remarkable growth of
41%yoy.
- Hold to receive dividend. Upside limited at only 8%. Div yield projected at 4.4% p.a.
Fair value at end-2013 is B75.25/share. We recommend only “hold to receive
dividend” (dividend yield estimated at 4.4% p.a. on average) because the current
share price has only 8% upside left. PER in 2013 remains high at 13.1x, compared
with the sector’s average of 10x. Moreover, in 1-2 years ahead there is still not a
project to create significant adding value for the company.