Samart Corporation

Samart Corporation Plc (SAMART) 

 

NDR reveals broadly positive outlook 

Investment thesis

We arranged a non-deal domestic roadshow with SAMART’s management on October 1, with the overall feedback offered broadly positive. This was led by an expected modest 4Q15 earnings recovery and a strong FY16 bounce, underpinned by greater newly signed large-scale projects from subsidiaries from 3Q15. We believe that its share price is at the bottom and its earnings have bottomed out in 1H15. Scope for upside will come from the potential 20-30MW solar power projects and the Bt2.5bn first phase of MEA’s underground cable installation. Its share price will regain momentum once the signing the MOU of Tariff with EGAT for the coal-fired power plant and the PPA for waste-energy projects materialize. It now trades at a discount—FY16 PER of 14.5x against previous PER peak of 19.9x in the absence of Cambodian power plant news in mid-2013. BUY!

SAMTEL to have four-year high in project backlog at YE15 

We expect SAMTEL’s project backlog to reach Bt10bn at YE15, up 45% YoY, or a four-year high since 2011. We conservatively estimate that new-project signings are worth Bt8-9bn in FY16, led by SRT’s Nationwide Fiber (Bt2bn), PEA’s PortalNet Five-Year Extension (Bt4bn), BMA’s Security (Bt1bn), DOL’s Information Center Phase 3 (Bt1bn) and other projects (Bt700m). 

Upside of 3-5% from solar power plants in FY16 

SUT will submit in November applications for eight locations to produce the total 40MW in solar energy sales to EGAT. The short-listed pre-qualified bidders will be announced in December and the PPA in 1Q16. Assuming the revenue/MW and profit/MW of Bt8m and Bt3.3m, respectively, the 20-30MW in total to be secured with the PPA and the feed-in tariff of Bt5.66/Kwh, we estimate that the 20-30MW would add Bt53-79m to its FY17 bottom-line (or 3.1-4.5%). We have yet to factor in these projects to our forecasts and valuation. 

Five locations for waste power plants already factored in

SUT will submit in 1H16 applications for five locations to produce the total 40MW for waste energy sales to EGAT. It has already signed the MOU with the Subdistrict Administrative Organization in five provinces. Assuming the revenue/MW and profit/MW of Bt38m and Bt14m, respectively, the 40MW to be secured with the PPA, the feed-in tariff of Bt5.78/Kwh in the first eight years, we estimate that five waste plants would add Bt571m (or a 26.2% addition) to SAMART’s FY18 profit. We have already factored these into our model. 

TEDA’s upside from MEA’s underground cable installation

The MEA plans to install underground cables to replace overhead ones, starting with the first Bt2.5bn two-year phase along Nonsi Rama III Road. TEDA will join hands with Nawarat Patanakarn to bid for the project. We estimate that the annual net profit from this project would be Bt50-60m (assuming NM of 5-6%), or 3-4% to SAMART’s profit.