Ratchaburi Electricity Generating Holding
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New projects to boost profit BUY
Ratchaburi Electricity Generating Holding Plc (RATCH)
RATCH is currently looking for new opportunity to expand its business. While new PDP
plan is required for domestic projects, RATCH is currently studying on feasibility and
taking part in auctions for overseas projects; they would provide an upside for
RATCH's earnings. 1H14 dividend is B1.1/share.
- Seeking new investment projects
Discussions about RATCH's new domestic and overseas projects were made
at the analyst meeting yesterday. Despite RATCH's expertise on fossil fuel
and renewable energy, new PDP plan is required for its new or domestic
projects. While plans for domestic projects are still unclear, RATCH is
seeking new opportunity to expand its business overseas (in Myanmar,
Laos, Vietnam, the Philippines and Indonesia). RATCH has been conducting
a feasibility study and taking part in auctions for overseas projects. The new
projects would continuously have upside on RATCH's earnings in the future.
- 2H14 profit to drop
2H14 normalized profit is expected to drop from 1H14 because 4Q14 is
usually a low season for power generator. In addition, contract of most
plants would reach the end within November, so they would not work at
their full capacity in December. Still, FY2014 earnings are expected to grow
by 21.6%yoy. Only one unit will undergo major turnaround in 2014 (versus
three units in 2013). Moreover, a 210-MW SPP and a 9.9-MW VSPP (RATCH
holds 40% stake) are starting their commercial runs this year.
- 1H14 dividend is B1.1/share or 1.9% dividend yield
We derive FY2014 fair value at B60. RATCH is a defensive stock with good
growth in a long term. We recommend BUY for 4.1%p.a. dividend yield.
1H14 dividend is B1.1/share; XD date is August 29.
