Glow Energy

Glow Energy Plc (GLOW)

- 3Q13 net profit to soar 58.4%qoq from lower Fx loss
We project 3Q13 net profit at B1.93bn, increasing 58.4%qoq mainly because
a Fx loss would decrease to only B150m from B892m in the prior quarter as
the Baht has weakened only slightly by 0.48%qoq at end-3Q13. Excluding the
item, normalized profit would still increase 7.2%qoq to B2.04bn due to the
following contributions. 1) Cogeneration power plants, Phase 5 project and the
coal-fired plant, have resumed their normal operation at a capacity of 85%
and 89%, respectively, after a maintenance shutdown in 2Q13. This factor
would negate a decrease in gross margin from power selling following Ft in
May-August that has dropped by B0.05/KWh. At the same time, gas price has
risen by 2.5%qoq, making margin of a gas-fired power plant decrease
13.2%qoq to B0.46/KWh (while margin of a coal-fired power plant has shifted
3.9%qoq to B2.13/KWh as a result of decreasing coal price). 2) Utilization rate
of Gheco-One power plant has been increased slightly to 67%. The utilization
rate in the previous quarter stood at 62% as a result of a maintenance
shutdown for warranty inspection. However, after the warranty maintenance
succeeded, a further problem was found in the heater unit 6, causing the plant
to operate at only 500MW since the second half of July until mid-September
before increasing to 580 MW in late September after the heater was fixed. In
addition, the slight depreciation of Baht has made Gheco-One’s Fx loss
decrease to B139m from B736m in 2Q13. However, 3Q13 profit might be
suppressed by a temporary reduction of 46.9%qoq in operation of Huay Ho
power plant after some electricity posts have been damaged by land slide,
obstructing the plant from transmitting electricity to EGAT. The restoration
would take at least one month and a half to compete, or three months in the
worst case scenario and GLOW is now negotiating with the EGAT for
postponing the power purchase in 4Q13 to 2014 instead (which would mount
the total power purchase in 2014 from normally 470 GWh to 600 GWh).
Overall, 9M13 net profit would stand at B5.64bn, growing 43.5% from the
same period last year and making up 72% of our FY2013 forecast.
- Profit to grow 41%yoy in 2013. Flat growth foreseen in 2014
Preliminarily, we still maintain our FY2013-2014 forecast, projecting the
normalized profit in 4Q13 to grow from 3Q13 due to two main factors. 1)
Gross margin from power selling would increase following Ft in September –
December that has risen B0.07/KWh, making margin of a gas-fired power
plant revive 8.7%qoq to B0.50/KWh, while margin of a coal-fired power plant
would increase continuously. 2) Gheco-One power plant would resume a
higher capacity of 90% after the broken heater was repaired since late
September. Nevertheless, there would be slight pressure from the temporary
halt of Huay Ho power plant in 4Q13 that might make the cost of operation
stabilize at B150m. Overall, FY2013 net profit would grow 41%yoy, while in
FY2014 the profit would only stay flat from 2013 due to lack of new projects.
- Hold to receive dividend. Upside limited at 4%. Div yield projected at 3.4% p.a.
Fair value at end-2013 is B75.25/share. We recommend only “hold to receive
dividend” because the current share price has only 4% upside left. PER in
2013 remains high at 13.5x, 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.