Electricity Generating

2H14 profit drops due to seasonal effect, but not worrying BUY

Electricity Generating Plc (EGCO)

2Q14 net profit slipped by 0.6%qoq. 2H14 profit would decline due

to seasonal effect. Yet, EGCO is likely to grow in a long run and

rebound outstandingly in 2016 thanks to its ongoing projects.

- 2Q14 profit slips 0.6%qoq

2Q14 net profit was reported at B2.47bn, slipping 0.6%qoq. Total

income grew by 5.7%qoq to B4.44bn owing to high electricity demand

in summer. Share of profit from investment rose by 48.5%qoq, but

negated by higher deferred tax. Overall, 1H14 net profit was B4.96bn,

rising 23.4%yoy, making up 68% of FY2014 earnings forecast.

- Maintain forecast. 2H14 profit to drop due to seasonal effect

We maintain FY2014 earnings forecast; 2H14 earnings are expected to

drop from 1H14 as a result of lower electricity usage (low season).

EGCO is projected to make the bottom in 4Q14 because of a one-month

planned shutdown of BLCP power plant (EGCO holding 50% stake).

However, EGCO is expected to benefit slightly from the acquisition of

40.95% stake on 630 MW Masinloc coal-fired power plants (two units of

315 MW each) in Zambales province, the Philippines. FY2014 earnings

are estimated to grow by 3.8%yoy because income from Bueng Sam

Pran, NED, Theppana, and Solarco would be recognized for a full year.

- BUY. Top pick among big-cap power plant stocks

FY2014 fair value (DCF) is B160. We reiterate to buy when the price

weakens for its strong growth potential in the long run. EGCO is the top

pick among big-cap power plant stocks.