Glow Energy

Glow Energy Plc

We are convinced that 2Q14 profit will make a year high. However,
the share price has already risen to reflect FY2014 profit forecast
until substantially exceeding the new fair value, while a profit
decline is foreseen in 2015. Downgrade to SELL.

- 2Q14 profit to make new high
We estimate 2Q14 net profit at B2.8bn or the growth of 21.9%qoq.
Earnings from every power plant of GLOW would increase from the tariff
that usually peaks in March-May of every year and full utilization rate of the
power plants. Overall, 1H14 net profit is projected at B5.1bn, increasing
37.9%yoy and accounting for 61% of our FY2014 forecast.

- Up 2014-2015 forecasts
We revise up 2014 profit forecast to reflect the possibly better-thanexpected
earnings in 1H14. However, the profit in 2H14 might weaken from
1H14 mainly because the tariff of Gheco-One and Glow IPP would lower on
seasonal effect and the utilization rate of GLOW IPP usually decreases in the
fourth quarter of every year after it already produces power to the limit of
the annual power purchase contract in the first 11 months of the year.
Overall, the profit would grow 22.9%yoy to a historical high in 2014 and
then decline 6.7%yoy in 2015 from major turnarounds of GLOW IPP and
Gheco-One for 40 days and 45 days in 3Q15 and 1Q15, respectively.

- Downgrade to SELL. Switch to EGCO
Under the new forecast, 2014 fair value is B82/share. The current share
price has already exceeded the new fair value by 10.5%, while there are no
projects to add significant value to the company in the next couple years.
The current P/E ratio of 15.1x is also higher than the regional average. We,
therefore, downgrade our recommendation from HOLD to SELL and
recommend switching to EGCO which has a potential to grow continuously
in the next few years and has low P/E ratio of only 10x.