Ratchaburi Electricity Generating Holding

Ratchaburi Electricity Generating Holding Plc (RATCH)

- Overseas investment to boost growth
According to the analyst meeting, RATCH's growth would mainly depend
on overseas business from now on. RATCH is currently planning on
business diversification, not only focusing on electricity power business,
but also on entire power business; from upstream production (fuel
business) to downstream production (fuel retail business in countries
with good potential: the Philippines, Indonesia, Vietnam, Laos and
Myanmar). In 2014, RATCH plans to raise its enterprise value from
B120bn to B280bn and change its income structure. Currently, over
50% of RATCH's income is from power plants in Thailand, but in the next
10 years, RATCH's income structure is as follow: Laos and Myanmar
(37%), Thailand (18%), Australia (10%), other ASEAN countries (19%),
non-ASEAN countries (6%); for secondary businesses: fuel (coal and
natural gas) business (5%), and power distribution business (5%).
RATCH has been expanding its investment aggressively, currently
studying on plausibility for the investment on the 300-megawatt coalpowered
plant in Kengtung in the northern Myanmar valued B16bn along
with the local allies, of which the conclusion would be made within 2014.
Moreover, RATCH has submitted to bid for a 300-megawatt gas-powered
plant in Myanmar and a 600-megawatt coal-powered plant in Malaysia.
These would boost RATCH's enterprise value in the future.

- 1Q14 profit to rebound
RATCH’s 4Q13 net profit was B356m, plunging 83.2%qoq, worse than
expected, as a result of the following factors: 1) B292m extraordinary
expense from impairment of Koh Kong and Nam Ngeum 3 plants
investment projects was booked (previously not revealed). 2) RATCH's
share of profit from subsidiary dropped by 91.2%qoq to B49m. 3) Fx
gain dropped by 17.9%qoq to B288m. Overall, RATCH's FY2013 net
profit was B6.2bn, falling 20.0%yoy. However, 1Q14 net profit is
projected to rebound qoq due to seasonal effect, as all of RATCH's plants
will be working at their full capacity. FY2014 normalized profit is
expected to leap by 21.6%yoy, as RATCH has only one major overhaul
this year, versus an overhaul of three units last year. Furthermore, a
210-megawatt SSP and a 9.9-megawatt VSPP (RATCH holds 40% stake)
are starting their commercial runs this year.
-
"BUY". 2H13 dividend yield is 2.3%
We derive end-2014 fair value at B60. We recommend "BUY" for 20%
upside and 2H13 dividend at B1.17/share (2.3% dividend yield). XD
date is 28 February 2014 and dividend will be paid on 11 April 2014.