Italian-Thai Development

Lights back on at Dawei. The Thai and Myanmar governments have agreed to get the Dawei port going again – and it is going to be expanded ten-fold from 200 sq km to 20 sq km. This is similar in size to the Thilawa project developed by the Myanmar and Japanese governments. The terms of reference (ToR) for the bidding for the first phase of the Dawei project are set to be drafted in November 2014. ITD has invested Bt6bn (~US$189mn) in Dawei already, building a port, roads, and a small power plant. The reboot of Dawei will be good news as it will likely give ITD full reimbursement plus interest. ITD plans to bid for a portion of the US$2bn in projects in the first phase of the Dawei project in Myanmar this year. We see Dawei as very attractive, in an ideal location, and of interest to multinationals. 

Dhaka Bangladesh expressway likely to start in 4Q14. The long-delayed Bt37bn Dhaka Elevated Expressway in Bangladesh, which involves a 30-year concession, is in the final stages of discussion and construction is expected to start in 4Q14 and finish by 2018. We have seen media reports confirming that it is a ‘go’, reporting that ITD has brought in China Railway Construction to be co-contractor. ITD holds 60% of this concession with the Bangladesh government holding the rest. This will contribute construction revenue of Bt10bn per year in 2015-2018. 

Current backlog at Bt198bn. Backlog on hand (not including subsidiaries) is reported as of September 1, 2014 at Bt198bn. Most revenue continues to come from SRT Red Line contract 2, MRT Blue Line contract 1 and MRT Purple Line contract 6. Inclusion of the Dhaka Bangladesh expressway project adds Bt37bn to backlog; we expect revenue to begin in 2015 and run through 2018. 

Catalysts support share price upside. There are a number of share price catalysts ahead as projects come up for grabs and there is news about its concession at home (potash) and overseas (Dawei, Dhaka and Mozambique). We assign a target price of Bt8.5 (Bt6.5 for 12x 2015 EV/EBITDA and Bt2.0 for business abroad, mainly Mozambique).