Electricity Generating

Electricity Generating Plc (EGCO)

Event
- EGCO reported 3Q13 net profit of Bt2.36bn (EPS Bt4.49/sh). Excluding FX impact,
normalized net profit was Bt2.27bn (Bt4.32/sh), up 36% YoY and well ahead of our
forecast. Maintain Outperform, TP Bt172.
Impact
- Strong core operation: Earnings from consolidated power plants nearly doubled
YoY due to higher revenue from Availability Payments and lower costs because of
lower maintenance. Costs were also kept well under control with SG&A declining by
15% YoY.
- Associate income also growing: Pre-FX income from associates – power plants in
which EGCO has a 50% or less shareholding – grew 11%. This was driven by strong
growth at the NTPC hydro power plant (+14% YoY) and GEC (SPP power plants),
which returned to profitability from a loss last year due to outages. This was offset
by flat earnings growth from BLCP and a 13% earnings decline at GPG. Note that at
the beginning of 3Q13, EGCO sold its 40% stake in Conal Holding, which operates
small diesel power plants in the Philippines. As such, earnings from this unit are no
longer included.
- Levering up: EGCO’s net D/E has increased marginally to 0.57x at the end of 3Q13
compared to 0.49x at the end of 2012. The higher gearing was mainly due to
increased investments over the past 9 months. We expect the company to continue
levering up given its still relatively low gearing and the need for investing in new
projects.
Earnings and target price revision
- No change.
Price catalyst
- 12-month price target: Bt172 based on a DCF methodology.
- Catalyst: new projects, quarterly results
Action and recommendation
- We continue to like EGCO given its attractive valuation and strong cash flow
generation. The stock trades on just 0.9x forward P/BV and 9x forward PER, making
it the cheapest within the sector. Maintain Outperform, TP Bt172.