Electricity Generating

Electricity Generating Plc (EGCO)

 

- High profit growth in 1Q15, lower than expected though  

 

EGCO posted 1Q15 net profit of B1.5bn, surging 207.4%qoq but still lower than expected. Profit increased mainly because every refinery has resumed a full utilization rate in a high season. However, major adverse factors in this quarter were 1) an unplanned shutdown of Unit 1 of BLCP, 2) 43-day and 46-day planned shutdowns of Masinloc and Quezon power plants, 3) B10m loss from Boco Rock Wind Farm (BRWF) despite its first quarter of a full utilization rate, and 4) B117m Fx loss, versus B11m in 4Q14. Overall, 1Q15 profit made up 19.1% of our full year forecast. 

 

- 2Q15 profit to improve qoq on seasonal effect  

We maintain our FY2015 forecast, projecting EGCP’s profit in 2Q15 to grow from 1Q15 as a result of a high season (summer) in which every domestic power plant will be operating at its full capacity and Masinloc and Quezon in the Philippines have resumed their full capacity after the planned shutdowns. For BLCP, profit in 2Q15 would remain close to that of 1Q15 due to a forced shutdown of Unit 2 in May, before recovering in 2H15 because there will not be an annual turnaround of the refinery in 4Q15. Accordingly, FY2015 profit is projected to grow approximately by 4.6%yoy. 

 

-Highest dividend yield among peers at 6% p.a. 

FY2015 fair value (DCF) is B188. We reiterate BUY. Its profit would grow remarkably in the long run, P/E ratio is only 10x, and dividend yield is as much as 6% p.a. EGCO is a top pick of big-cap power generators.