Ratchaburi Electricity Generating Holding

Asia Plus Securities May 27, 2015 8:19 pm

 

Ratchaburi Electricity Generating Holding Plc (RATCH)

- Overseas projects are main target

RATCH is marching forward with its investment plan. A joint venture for a 2,640 MW power project in Marid, Myanmar, is now under consideration of the Myanmar's government and would be entered into a memorandum of agreement (MOA) in early June 2015. The company is also increasing its investment in two solar farms in Japan with total capacity of 20.1 MW (RATCH holding 60percent stake at present). Moreover, RATCH is selling its power project in Australia to those who are interested and giving a fair price. In addition, the 1,800 MW Hongsa power project (RATCH holding 40percent stake) will be able to start a commercial run as scheduled.

- Profit in uptrend

We maintain our FY2015 earnings forecast. RATCH’s profit is expected to grow continuously in the rest of the year, thus compensating for negative factors in 1Q15. Since 2Q15 is a high season (summer), the EGAT would order full-capacity electricity generation to meet soaring electricity demand. In addition, RATCH would start recognizing profit from a coal-fired 1,800 MW Hongsa plant (RATCH holding 40%) in 2H15, of which the Phase 1 and Phase 2 will begin a commercial run in June and November 2015, respectively, as planned. Overall, RATCH’s profit is expected to advance by 10.3%yoy in 2015 and 20.7%qoq in 2016, mainly from Hongsa plant, RW Cogen, Nava Nakhon Electricity Generating, and the solar farms in Japan.

- BUY for upside from new pending projects

FY2015 fair value is B68. We recommend BUY as RATCH is a defensive stock with potential growth in the long run; 3.7%p.a average dividend yield can be expected; upside from new pending projects are not included in our forecast yet. 

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