Ratchaburi Electricity Generating Holding RATCH

Monday, March 16, 2015
Analyst Meeting/4Q14 Results Note
Ratchaburi Electricity Generating Holding
Overseas mega projects to boost RATCH's profit
RATCH
Rec. : BUY
RATCH is looking for new projects to boost its profit in the long run. It currently
has many projects waiting for approval e.g. coal-fired power plant projects in
Myanmar; these projects would give an upside on RATCH's earnings and fair
value. RATCH is another top pick of energy stocks.
 Marching forward on mega projects
According to the analyst meeting, RATCH is working on two coal-fired power
plants in Myanmar now, a 660 MW plant in Kengtung and a 2,640 MW plant
in Myeik (currently under the Burmese government's deliberation for the
MOA to be made). In addition, RATCH has planned to enter a joint venture
for a coal mine project in Indonesia. RATCH has been interested in the coalfired power business in Myanmar, Cambodia, and Vietnam; these projects
will ensure that RATCH have sufficient power and fuel throughout the
project and grant RATCH a long-term upside; this is not included in our
forecast yet.
 FY2015 profit to grow 10.3%yoy thanks to Hongsa plant
We estimate RATCH's FY2015 earnings to rebound by 10.3%yoy mainly
from 751.2 MW Hongsa plant (RATCH holding 40% stake). Phase 1 and
Phase 2 of Hongsa plant will start the commercial runs in June and
November 2015, while Phase 3 will start in March 2016. In the short term,
RATCH's 1Q15 profit is expected to revive from 4Q14 since every plant has
resumed working at their full capacity and no massive extraordinary
expense is likely to be booked like in 4Q14.
Current Price (B): 62.50
Target Price (B): 68.00
Upside : 9.2%
Dividend Yield : 3.7%
Total Return : 12.5%
Market Cap. (Bm) : 90,625
CG Score :
Technical Chart
 BUY for upside from pending projects
FY2015 fair value is B68. We reiterate BUY as RATCH is a defensive play
with potential long-term growth and expected dividend yield of 4% p.a.
RATCH is the top pick among big-cap energy stocks.
ASP vs IAA concensus
EPS (B)
ASP
Cons
%diff
2015F
4.78
4.86
-2%
2016F
5.77
5.98
-4%
Source: IAA concensus and ASP
Key Data
FY: Dec 31
Sales (Bm)
Net Profit (Bm)
Norm Profit (Bm)
EPS (B)
PER (x)
DPS (B)
Dividend Yield (%)
BVS (B)
PBV (x)
ROE (%)
Source : ASP Research
FY12A
55,365
7,726
5,075
3.50
17.6
2.25
3.6
37.06
1.7
15.1
FY13A
49,020
6,514
5,532
3.82
16.2
2.27
3.7
40.78
1.5
11.5
FY14A
54,970
6,279
6,004
4.14
14.9
2.27
3.7
42.21
1.5
10.4
FY15F
52,839
6,927
6,927
4.78
12.9
2.30
3.7
45.58
1.4
10.9
FY16F
53,632
8,360
8,360
5.77
10.7
2.30
3.7
49.05
1.3
12.2
Nalinrat Kittikumpolrat
License No. : 018350
nalinrat.re@asiaplus.co.th
This report is a rough translation of one of our Thai-language research products. It is produced primarily with time efficiency in mind, so that English-reading clients can see what the main recommendations are from our Thai-language research
team. Given that this is a rough-and-ready translation, Asia Plus Securities pcl cannot be held responsible for translation inaccuracies.) The reports and information contained herein are compiled from public data sources and our analysts'
interviews with executives of listed companies. They are presented for informational purposes only and not to be deemed as solicitations to buy or sell any securities. Best attempts have been made to verify information from these vast sources, but
we cannot guarantee their accuracy, adequacy, completeness and timeliness. The analyses and comments presented herein are opinions of our analysts and do not necessarily reflect the views of Asia Plus Securities.
 Marching forward on mega projects
According to the analyst meeting, RATCH is working on two projects in
Myanmar now: 1) a 660 MW plant in Kengtung currently under the final
negotiation before making the Memorandum of Agreement (MOA); and 2) a
2,640 MW plant in Myeik (RATCH holding 40% stake) currently under the
Burmese government's deliberation; the MOA is projected to be made in
May 2015.
In additional to these two projects, RATCH has planned to enter a joint
venture for a coal mine project in Indonesia with coal reserves of 100
million tons and 3-5 million tons/year production capacity; RATCH is
projected to hold 15-20% stake in this project and invest B2bn in it. Still,
this project needs to be approved by the Board of Directors first.
The company has been interested in the coal-fired power business because
it sees that coal demand would increase as more coal-fired power plants will
be opened in neighboring countries soon. RATCH has invested in many coalfired plants in Myanmar (Myeik and Kengtung), Cambodia (2,000 MW Koh
Kong plant; RATCH has already signed the agreement with allies in
Cambodia and Thailand in February 2014), and Vietnam (RATCH has
already signed the joint venture concession with the Vietnamese
government for a 1,200 MW plant, currently under a feasibility study; the
construction will start in 2017); these projects ensure RATCH will have
sufficient power and fuel throughout the project.
The company is currently signing a memorandum of understanding (MOU)
with PTT for a construction of LNG terminal phase 3 with a production
capacity of 5 million tons/year feeding fuel to projects in the West through
Yadana and Yetagun pipelines. Initially, RATCH is projected to hold 20-30%
stake in this project. These will grant RATCH a long-term upside, which is
not included in our forecast yet.
 FY2015 profit to grow 10.3%yoy thanks to Hongsa plant
electricity usage and B510m impairment loss from 27.6 MW Starfish Hill
(RATCH holding 80% stake). Consequently, RATCH's FY2014 net profit was
B6.3bn, contracting 20.1%yoy.
Nevertheless, we estimate FY2015 earnings to rebound by 10.3%yoy mainly
from 751.2 MW Hongsa plant (RATCH holding 40% stake). Phase 1 and
Phase 2 of Hongsa plant will start the commercial runs in June and
November 2015, while Phase 3 will start in March 2016. In the short term,
1Q15 profit is expected to revive from 4Q14 since every plant has resumed
working at their full capacity and no massive extraordinary expense is likely
to be booked like in 4Q14.
4Q14 Earnings Result
Key Data (Bm)
Sales
Cost of Sales
Gross Profit
Operating Expenses
Operating Proift
Share of profit of subsidiaries
Profit (Loss) from FX
Interest Expenses
Net Profit
Norm Profit
EPS (B)
Gross Margin (%)
Net Profit Margin (%)
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14 %QoQ %YoY
2014
2013 %YoY
11,652 13,864 10,477 13,027 11,082 13,349 14,121 16,418 16.3% 26.0% 54,970 49,020 12.1%
(9,586) (11,266) (9,833) (10,376) (9,248) (11,278) (13,184) (14,204) 7.7% 36.9% (47,914) (41,060) 16.7%
2,066 2,598
644 2,651 1,835 2,070
937 2,214 136.2% -16.5% 7,056
7,960 -11.4%
(345)
(327)
(377)
(689)
(395)
(349)
(510)
(953) 86.9% 38.2% (2,207) (1,739) 26.9%
1,721 2,271 1,613 1,962 1,439 1,721 1,814
(126) -106.9% -106.4% 4,849
7,567 -35.9%
506
(175)
428
(31)
416
275
340
254 -25.2% -931.0% 1,285
728 76.6%
448
(383)
351
288
(94)
(98)
252
288 14.0% -0.2%
348
704 -50.6%
(496)
(391)
(358)
(388)
(360)
(408)
(408)
(343) -15.9% -11.6% (1,518) (1,633) -7.0%
2,344 1,553 2,090 1,874 2,364 1,848 1,954
113 -94.2% -94.0% 6,279
7,860 -20.1%
2,030 1,176 1,809 1,643 1,802 1,926 1,883
392 -79.2% -76.1% 6,004
6,658
-9.8%
1.62
1.07
1.44
1.29
1.63
1.27
1.35
0.08 -94.2% -94.0%
4.33
5.42 -20.1%
17.7% 18.7%
6.2% 20.4% 16.6% 15.5%
6.6% 13.5%
12.8% 16.2%
20.1% 11.2% 19.9% 14.4% 21.3% 13.8% 13.8%
0.7%
11.4% 16.0%
Source :Financial Statement / ASP Research
Investment Projects of RATCH in Present
Source : ASP Research
Regional Key Recommendations
Company
CHINA
CHINA YANGTZE-A
HUANENG POWER-H
DATANG INTL PO-H
HONGKONG
CHINA POWER INTE
CHINA RES POWER
JAPAN
ELECTRIC POWER D
CHUGOKU ELEC PWR
CHUBU ELEC POWER
INDIA
NHPC LTD
NTPC LTD
RELIANCE POWER
PHILIPPINES
FIRST GEN CORPOR
ABOITIZ POWER
THAILAND
RATCHABURI ELEC
ELEC GENERATING
GUNKUL
CK POWER
GLOW ENERGY PCL
AVERAGE
Key Risks
PBV
2015F
2016F
PER
2015F
2016F
REC./BB
Rating
Current
Price
Target Price
Upside
(%)
4.13
3.82
3.78
10.3
8.5
3.6
12.0
10.8
4.6
17.4%
26.6%
27.2%
2.0
1.4
0.8
1.9
1.2
0.8
15.3
7.8
10.0
15.0
7.4
6.9
4.67
3.80
3.8
18.2
4.7
23.7
24.8%
29.9%
1.0
1.2
0.9
1.1
7.2
7.3
7.0
7.0
3.62
3.22
3.15
3925.0
1555.0
1413.5
4450.0
1615.7
1445.6
13.4%
3.9%
2.3%
1.1
0.9
0.7
1.0
0.9
0.7
13.0
19.1
26.9
13.5
25.6
20.4
3.60
3.44
2.41
19.7
159.5
58.3
23.4
155.5
72.3
18.9%
-2.5%
24.2%
0.7
1.5
0.8
0.7
1.4
0.7
10.0
14.1
16.3
9.4
13.3
12.4
4.00
3.08
29.6
45.9
32.0
43.7
7.9%
-4.9%
2.1
3.3
1.7
3.1
17.6
18.0
12.6
16.7
BUY
BUY
BUY
BUY
SELL
62.50
149.50
36.00
17.30
82.00
68.00
188.00
38.75
20.92
96.29
8.8%
25.8%
7.6%
20.9%
17.4%
1.4
1.1
5.9
7.1
2.4
2.0
1.3
1.1
5.4
6.3
2.3
1.8
13.1
9.9
58.4
269.1
14.8
12.9
10.8
9.3
38.0
265.2
15.0
11.8
1. There could be an unplanned shutdown of power plants.
2. Projects currently under development might not be able
to start a commercial run as scheduled.
3. There could be risk from overseas investment in the
Philippines, Indonesia, and Australia (country risk)
Remark:- Calculation excluded companies with unusual PER or PBV
BB Rating is the average from Recommendation Consensus of analysts in the last 12 months etc.
5 = BUY, 4 + WEAK BUY, 3 = HOLD, 2 = WEAK SELL, 1 = SELL
Source : Bloomberg / ASP Research
Source : ASP Research