Global Power Synergy

Global Power Synergy Plc (GPSC) 

 

Investment thesis

Since GPSC’s debut, its share price has fallen 5.6% and it is now trading at 1.0x 15YE book value. Although we believe that the firm is the best-placed utilities player to capture growth opportunities within Cambodia, Laos, Myanmar and Vietnam (CLMV) along with its parent PTT Group’s global expansion, any sizable near-term catalysts remain to be seen. When valuing against utilities counters, the stock is also less appealing—at 0.16x PBV/ROE versus conventional peers’ average of 0.12x; its secured projects will mostly bear fruit in 2018 as well. Given the current power market, we initiate with a HOLD rating and a DCF-based valuation for all of its secured projects at Bt29/share. Among utilities, we maintain EGCO as our preferred pick due to its most expansive ROE and cheapest valuation.

Secured and diversified capacity growth

GPSC’s in-hand secured capacity will produce a 2015-19 CAGR of 7%. From its projects under development, its generating capacity of 1,315 equivalent-MW will grow to a substantial 1,884MW by YE19. Furthermore, its chilled-water operations are set to double from 6,000 refrigeration tons (RT) to 12,000RT by 2016 and its steam capacity will expand 12% from 1,345 ton/hour (tn/h) to 1,512 tn/h by 2017. 

But majority of growth is mostly back-loaded in 2020

Despite an anticipated 83% earnings jump from 2015 to 2020, the majority of GPSC’s growth is mostly back-loaded and the 2015-17 NPAT profile is more subdued by comparison. We estimate the firm’s NPAT to jump 34% during 2018-20 as 94% of its pipeline capacity is then due for commission. Given the current rare capacity growth environment, we also do not see any substantial projects (on top of the Ichinoseki solar farm) concluding in-time to support near-term growth. 

Leverage on PTT Group’s regional presence as yet unrealizable

GPSC parent firm PTT Group has a 30-year presence in ASEAN, which would definitely provide the firm with new opportunities internally and on corporate and governmental levels. But, we believe that such chances will not add to its near-term capacity any time soon. Nor will we also see current projects under development (such as CUP-4 cogeneration plant, the Victory complex in Vietnam, and Thanlyin and Marid projects in Myanmar) conclude soon either.