Electricity Generating

Electricity Generating Plc (EGCO)

- 4Q13 profit worse than expected
EGCO announced 4Q13 net profit at B507m, plunging 78.5%qoq, worse
than our forecast mainly because of financial expenses that surged
123.2%qoq to B1.29bn, B600m higher than our projection. The weak
profit also resulted from seasonal effect as an electricity demand in
4Q13, which is a cold season, was low. In addition, most power plants
had already produced power to the limit of the annual power purchase
contract since 9M13-11M13, so the power generation decreased in this
quarter, resulting in the lower Availability Payment (AP) income.
Moreover, shared profit from subsidiaries dropped 21.2%qoq to
B1.36bn. Overall, FY2013 profit was B6.9bn or a decrease of 38.5%yoy.

- To revive in 1Q14 on seasonal effect
We project EGCO’s profit to revive in 1Q14 after all power plants resume
their full utilization rate, plus recognition of income from six solar power
plants of Solarco project with the total capacity of 57 MW (EGCO holds
49% stake) for the first full quarter. Normalized profit in 2014 is
projected to improve slightly by 3.8%yoy as supported by revenue from
solar and wind turbine farms e.g. Bueng Sam Pan, NED, Theppana, and
Solarco, that have finished the construction and started running
commercially since 2013. However, as most investment projects of
EGCO are greenfield projects, they are still under a construction process
that usually takes time and EGCO will be able to show good growth
again in 2016 after the constructions are complete, which include a new
Khanom power plant with the contracted capacity of 900 MW (a PPA
awarded by EGAT) and two SPPs, followed by a SPP and a 500 MW
Quezon expansion project in the Philippines in 2017-2018.

- Buy. Semi-annual dividend yield is 2.5%
2014 fair value is derived at B148.20 (DCF). We reiterate to buy EGCO
as the current share price still provide a high upside of 15% and the
company keeps its policy of paying dividend at not lower than that of the
prior year. Average dividend yield is 4.7% p.a. 2H13 dividend was
announced at B3.25 (XD date is on 18 March 2014).