Glow Energy

Lack supporting factors to boost growth from now on SELL

Glow Energy

- 3Q14 profit weakens on seasonal effect as projected

GLOW posted 3Q14 net profit at B2.3bn, decreasing 17.4%qoq, close to our

projection, mainly because of the IPP business; the utilization rate of GLOW

IPP, Gheco-One, and Huay Ho decreased from the prior quarter as a result

of a low season. In addition, the tariff in 3Q14 also lowered from 2Q14 (the

tariff usually peaks in March – May, which is summer). Overall, 9M14 net

profit was B7.5bn, growing 26.6% from the same period last year and

making up 85% of our full year forecast.

- Profit to peak in 2014 and weaken in 2015

We maintain our FY2014-2015 earnings forecast, projecting the profit in

4Q14 to weaken from 3Q14 because the tariff of Gheco-One and GLOW IPP

will decrease during a low season (winter) and utilization rate of GLOW IPP

usually lowers significantly in the fourth quarter of every year. However, the

profit would grow as much as 22.9%yoy to a historical high in 2014 before

declining by 6.7%yoy in 2015 from major turnarounds of GLOW IPP and

Gheco-One for 40 days and 45 days in 3Q15 and 1Q15, respectively.

- Downgrade to SELL. Switch to EGCO

We have now changed to use 2015 fair value (DCF) of B94; the current

share price is substantially overvalued. Moreover, there is no new project to

generate significant revenue in the next couple years. 2015 P/E ratio at

17.4x is higher than the regional average. Therefore, we recommend

gradually selling GLOW to take profit and switching to EGCO, of which the

growth can be expected in the next few years and P/E ratio is lower at 12.0x.