Electricity Generating

Profit to make new high in next five years BUY

Electricity Generating Plc (EGCO)

- Profit to make new high from new projects

According to the analyst meeting, EGCO is focusing on expanding

businesses overseas from now on for its considerable growth potential.

Recently, the company has joined an investment in a 227-MW geothermal

power plant in Indonesia (20% stake held by EGCO), which will be able to

increase the capacity to 400 MW in the long run. For local business

expansion, the company has to wait for a new PDP plan, which is initially

projected to comprise a bidding for a coal-fired power plant, for which EGCO

has a location prepared for the construction. However, considering only

projects in hand, which will start operating commercially every year from

now on until 2019, they will be able to boost EGCO’s profit to new highs

continuously.

- Profit to weaken on low season in 4Q14

We project EGCO’s profit in 4Q14 to weaken from 3Q14 because the final

quarter is usually a low season of electricity use (winter). Furthermore,

earnings in 4Q14 are projected hit a year’s low since BLCP (ECGO holds

50% stake) will have a one-month annual turnaround during the period.

Nevertheless, FY2014 profit is estimated to grow 14.4%yoy, while slight

growth of 1.4%yoy is expected in FY2015 for the capacity from

commencement of a wind power plant in Australia and full year recognition

of the geothermal power plant will be offset by decreasing capacity from

termination of PPA of REGCO in December 2014 and termination of KEGCO’s

PPA in 2016.

- Top pick of IPPs

2015 fair value (DCF) is B188. BUY is reiterated since EGCO has potential

for strong growth in the long run. We also select it as a top pick of IPP

stocks.