Ratchaburi Electricity Generating Holding

Ratchaburi Electricity Generating Holding Plc (RATCH) 

 

- Await conclusion from new projects overseas 

There was nothing new from the analyst meeting yesterday. RATCH is still marching forward with its investment plan. A joint venture for a power project in Myeik province of Myanmar, is now under consideration of the Myanmar government. The company is also increasing investment in two solar farms with total capacity of 20.1 MW in Japan (RATCH holding 60% stake at present) and has signed an MOU with PTT to study and develop several investment projects, e.g. a coal-fired power plant in Indonesia and a utility power plant in Vietnam. Moreover, RATCH is selling its power project in Australia to those who are interested and giving a fair price.  

- 2H15 profit still grows from 1H15 despite forecast cut 

RATCH posted 2Q15 net profit of B1.14bn, decreasing 1.6%qoq. As a result, 1H15 net profit was B2.3bn, falling 45.2% from the same period last year and making up 33.3% of our initial full-year forecast. We slash FY2015-2016 profit forecast to reflect extraordinary expenses in 1H15 and lower-than-usual normalized profit and also revise Fx rate assumption from B33/US$ to B34/US$ in 2015 and B35/US$ in 2016. According to the new forecast, FY2015 net profit would decrease 15.6%yoy and normalized profit would stay flat yoy, while FY2016 net profit would grow as much as 36.1%yoy from main projects, e.g. Hongsa power plant, RW Cogen, Nava Nakhon Electricity Generating, and the solar farms in Japan. 

- Buy for regular dividend yield of at least 4%p.a. 

Under the new forecast, 2015 fair value is B63 (previously B68). We reiterate BUY. RATCH is a defensive stock with a potential for long-term growth and regular dividend yield. 1H15 dividend was announced at B1.1/share (going XD on August 27) or 1H15 dividend yield of 2.03%. In addition, there are upsides from new projects that are awaiting approval, which have not yet been included in our forecast.