Glow Energy

Glow Energy (GLOW)
- 3Q13 net profit soars 57.9%qoq as expected, thanks to lower Fx loss
GLOW declared 3Q13 net profit at B1.92bn, increasing 57.9%qoq, close to our
projection, mainly because a Fx loss decreased to only B148m from B892m in
the prior quarter. Excluding the item, normalized profit increased 6.9%qoq to
B2.04bn, consistent with the income that rose 4.4%qoq to B17.6bn due to the
following contributions. 1) Cogeneration power plants, Phase 5 project and the
coal-fired plant, have resumed their normal operation at a capacity of 85%
and 89%, respectively, after a maintenance shutdown in 2Q13. This factor
helped to negate a decrease in gross margin from power selling following Ft in
May-August that has dropped by B0.05/KWh. At the same time, gas price has
risen by 2.5%qoq, making margin of a gas-fired power plant decrease
13.2%qoq to B0.46/KWh. 2) Utilization rate of Gheco-One power plant has
been increased slightly to 67%. The utilization rate in the previous quarter
stood at 62% because a problem found in the heater unit 6 caused the plant
to operate at only 500MW since the second half of July until mid-September
before it could increase to 580 MW in late September after the heater was
fixed. In addition, the slight depreciation of Baht has made Gheco-One’s Fx
loss decrease to B139m from B736m in 2Q13. However, 3Q13 profit might be
suppressed by a temporary reduction of 46.9%qoq in operation of Huay Ho
power plant after some electricity posts have been damaged by land slide,
obstructing the plant from transmitting electricity to EGAT, and the restoration
would take at least one month and a half to compete, or three months in the
worst case scenario. Overall, 9M13 net profit stood at B5.63bn, growing 45%
from the same period last year and making up 72% of our FY2013 forecast.
- Profit to grow 41%yoy in 2013. Flat growth foreseen in 2014
We still maintain our FY2013-2014 forecast, projecting the normalized profit in
4Q13 to grow 7.8%qoq due to two main factors. 1) Gross margin from power
selling would increase following Ft in September – December that has risen
B0.07/KWh, making margin of a gas-fired power plant revive 8.7%qoq to
B0.50/KWh, while margin of a coal-fired power plant would increase
continuously. 2) Gheco-One power plant would resume a higher capacity of
90% after the broken heater was repaired since late September.
Nevertheless, there would be slight pressure from the temporary halt of Huay
Ho power plant in 4Q13 that might make the cost of operation stabilize at
B150m. Overall, FY2013 net profit would grow 41%yoy, while in FY2014 the
profit would only stay flat from 2013 due to lack of new projects. New
investment plan of GLOW would start when an inconclusive auction of a coal
power plant according to the new power development plan (PDP) is opened
(likely in late 2014). This is an issue to be expecting as GLOW is very likely to
win the auction.
- Hold to receive dividend. Only 12% upside from 2014 fair value
We change to use fair value at end-2014 at B83.08/share. We recommend
only “hold to receive dividend” because the current share price has only 12%
despite comparing with 2014 fair value. EPS in the next three years would
stay flat, while 2014 PER is as high as 13.7x, compared with the sector’s
average of 10x. Therefore, it is not a good time to buy