GPSC sets high IPO price at Bt27

Varah Sucharitakul, executive director of Finansa Securities, an underwriter of GPSC’s IPO, said yesterday that the price was concluded on Wednesday night after book-building with institutional investors.

Despite its price-to-earnings ratio (P/E) of more than 20 times, the IPO price is set at a 15-per-cent discount to GPSC’s Bt32-Bt35 valuation by discounted cash flow.

Investors should also take into account GPSC’s projected growth of 17 per cent per year, he said.

Most other large listed power plants are trading at 9.5-14.3 times their projected 2015 earnings.

After a delay, GPSC yesterday appointed KT ZMICO, Finansa and Tisco as lead underwriters for its IPO. Subscriptions will open today and continue on Monday and Tuesday. The trading debut is slated for May 18.

GPSC will raise more than Bt10.11 billion from selling 375.57 million shares. The IPO price gives GPSC a market capitalisation of Bt40 billion.

May Bank Kim Eng Securities, a co-underwriter, said in a research note that GPSC was a defensive power-generation play, thanks to its long-term power purchase contracts. Giving it a target price of Bt30.5 a share, the security house cites GPSC’s high growth prospects as helping to offset the relatively higher valuation.

GPSC was created from the merger of Independent Power (Thailand), a large power plant that had won a bid as one the country’s first independent power producers, and PTT Utility, which supplies electricity and steam to PTT Group and other industrial customers in Rayong.

President Noppadol Pinsupa said the company was conducting due diligence for two merger/acquisition (M&A) deals in Thailand and overseas involving operating power plants with generating capacity totalling several hundreds of megawatts. Besides the M&A or its "quick win" tactic, GPSC stands to gain from its status as the flagship power subsidiary of PTT Group, pursuing a "big win" strategy to exploit opportunities in developing large power projects abroad.

It will also diversify into related businesses such as power transmission, energy storage, energy services and water supply.

Chief financial officer Sukittee Chaiyarak said that while pursuing the growth strategy, GPSC would still have sufficient funds for paying dividends at rates that are competitive with other large power stocks.

Although the IPO prospectus states the firm’s dividend-payment policy as just 30 per cent or higher, it intends to return much more than 30 per cent of its profits to shareholders, she said.

After floating 25 per cent of GPSC’s shares, PTT will see its holding diluted from 30.1 per cent to 22.6 per cent. PTT Global Chemical, Thai Oil and Thai Oil Power will have their stakes in the firm diluted to 22.7 per cent, 8.9 per cent and 20.8 per cent.

Finansa’s Varah said underwriters would gauge retail investors’ interest in GPSC before determining the share allocation to each group of investors, a process that is expected to end today.

GPSC’s revenue last year fell 9.9 per cent to Bt23.89 billion because of a reduction in power purchased by the Electricity Generating Authority of Thailand.

However, lowered power volumes did not hurt GPSC’s bottom line. Its net profit increased 35.6 per cent to Bt1.58 billion, thanks to the availability payment condition attached to its power sales contract.

The company’s first-quarter revenue rose 30.0 per cent to Bt6.47 billion and net profit soared 444.6 per cent to Bt531 million from a year earlier.

GPSC’s short-term goal to increase its power-generation capacity by 0.6-1 gigawatt by 2019 had already been assured with sales contracts inked with its customers.

As of the end of last year, GPSC had combined power-generation capacity of 1.32 equity gigawatts, 1,345 tonnes per hour of steam, 12,000 tonnes per hour of cool water and 2,080 cubic metres per hour of industrial water.