EDL‐Generation Buy (16E TP LAK9,816/US$1.20)
Earnings Review
Close LAK5,700 / US$0.70 May 18, 2016
Beat forecast/ Below forecast / In line
Seasonal weak start in 1Q16; the peak quarter to follow in 3Q16 Price Performance (%)
May‐16
Nov‐15
Oct‐14
Apr‐15
Source: Bloomberg, KT ZMICO Research Consensus EPS (Kip)
FY16 464.13
FY17 571.88
0.0
0.0
KT ZMICO vs. consensus Share data Reuters / Bloomberg
EDL.BK/EDL LS
Paid‐up Shares (m)
1,679.30
Par (USD, Kip)
0.49 / 4,000
Market cap (Kip bn/USDmn)
9,572.03 /1,180.06
Foreign limit / actual (%)
25.00 / 13.8332
52 week High / Low (Kip)
7,300 / 5,500
Avg. daily T/O (shares 000) Estimated free float (%)
72.54 11.1668
Beta
0.79
URL
www.edlgen.com.la
Note: BCEL‐KT Securities is the underwriter of EDL‐Gen. BCEL‐KT Securities Co., Ltd. is a joint venture company between BCEL Bank and KT ZMICO Securities (Thailand).
KT ZMICO is a selling agent of EDL‐Gen’s capital increase totaling 453.09mn shares through right offering and public offering with the subscription period during 28 Aug. 2015 – 8 Sept. 2015. Patcharin Karsemarnuntana Analyst, no 17834
[email protected] 66 (0) 2695‐5837
Earnings acceleration in 2H; growth prospects intact Given the expected earnings acceleration in 2H16E with the peak quarter likely in 3Q16E, the uptrend of earnings prospects during 2016‐19E (NP growth at 17% CAGR, underpinned by the contribution of new power asset acquisitions through both “To‐do list” and “Wish‐list” projects with targeted equity capacity to end up at 1,762MW by 2019E), and its undemanding valuation at 1.0x 2016E PBV (‐0.5SD) and 0.12x 2016E PBV/ROE (vs. regional peers of 0.14x), we reaffirm a Buy rating.
EDL‐Gen
Sep‐13
Aug‐12
Mar‐13
Feb‐12
Jul‐11
Jan‐11
LSX
Mar‐14
120% 100% 80% 60% 40% 20% 0% ‐20%
Weak start in 1Q16 with NP of 74,722mn kip EDL‐Gen delivered 1Q16 NP of 74,722mn kip (+9% YoY, ‐31% QoQ) and core profit of 69,758mn kip (‐13% YoY, ‐35% QoQ), with the solid larger profit contribution from its wholly‐owned hydropower plants (HPPs) to the extent of 88,623mn kip (+134% YoY, +4% QoQ) as the main support (given the first contribution of three new HPPs), against the first‐ever loss contribution from affiliates of 18,865mn kip given their smaller power generation along with forex impact (as was the case for Nam Ngum 2, there was lower power declaration due to conservative water management to mitigate a possible delay in rainfall this year). Three new HPPs the main driver for 1Q16 power generation Given the successful transfer of new HPPs, namely Nam Khan 2, Houay Lumphan Gnai, and Nam Sana, from Electricite Du Laos (EDL) to EDL‐Gen in 1Q16, the HPPs’ power generation delivered 662.32GWh in the quarter (+97% YoY with a maintenance shutdown at its Xeset Dam in 1Q15, +26% QoQ), resulting in stronger electricity sales to 286,318mn kip (+101% YoY, 29% QoQ). Sustained high EBITDA margin; solid financial position in 1Q16 The company marked a sustained high EBITDA margin to 88.7% in 1Q16 (vs. 78.5% in 1Q15, and 81.8% in 4Q15). Meanwhile, its debt to equity remained low at 0.26x in the quarter. Earnings forecasts maintained Despite the seasonal weak start in 1Q16 with quarterly NP representing 10% of our full‐year forecast, we keep our NP forecast unchanged at 779,411mn kip given the expected earnings acceleration in 2H16E with the peak quarter in 3Q16E following the seasonal high power generation. Financials and Valuation FY Ended 31 Dec Sales (Kipmn) Net profit (Kipmn) EPS (Kip) ‐weighted EPS (Kip) ‐ FD EPS growth – FD (%) DPS (Kip) BV (Kip) FY Ended 31 Dec PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2014 839,193 907,684 740.36 740.23 (6.6) 450 5,155
2015 847,759 640,839 456.44 381.61 (48.4) 260 5,421
2016E 1,315,325 779,411 464.13 464.13 21.6 278 5,607
2017E 1,586,553 960,359 571.88 571.88 23.2 343 5,836
2018E 1,947,247 1,086,545 647.02 647.02 13.1 388 6,095
2014 7.7 6.9 1.1 7.9 14.7 14.6
2015 14.9 11.2 1.1 4.6 8.3 13.8
2016E 12.3 9.8 1.0 4.9 8.4 48.7
2017E 10.0 8.5 1.0 6.0 10.0 57.6
2018E 8.8 8.2 0.9 6.8 10.8 78.9
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 3
Figure 1: EDL‐Gen’s 1Q16 earnings review Unit : mnkip Electricity sales Cost of sales Gross profit Profit from associates and JV Other income Currency exchange gains Total revenue Gain before expenses Administrative expenses Finance costs Income tax Net profit Core profit Gross profit margin* (%) EBITDA margin (%) Net profit margin (%) ROE (%) Debt / Equity ratio (x)
1Q15
4Q15
1Q16
% YoY
% QoQ
2015
2016E
% YoY
142,282 (63,332) 78,950 42,148 2,490 (11,531) 175,389 112,057 (21,680) (18,772) (3,034) 68,571 80,102 55.5 78.5 39.1 4.3 0.34
222,655 (67,407) 155,248 22,858 1,587 194 247,294 179,887 (38,042) (16,870) (9,787) 108,119 107,925 69.7 81.8 43.7 4.8 0.27
286,318 (139,444) 146,874 (18,865) 3,388 4,964 275,805 136,361 (22,720) (28,477) (10,442) 74,722 69,758 51.3 88.7 27.1 3.3 0.26
101.2 120.2 86.0 nm 36.1 nm 57.3 21.7 4.8 51.7 244.2 9.0 (12.9)
28.6 106.9 (5.4) nm 113.5 2,458.8 11.5 (24.2) (40.3) 68.8 6.7 (30.9) (35.4)
847,759 (269,374) 578,385 286,218 16,198 (9,975) 1,140,200 870,826 (121,027) (61,937) (39,954) 640,839 650,814 70.3 84.9 56.2 8.3 0.27
1,315,325 (397,561) 917,764 318,592 11,223 (351) 1,644,790 1,247,229 (146,911) (260,713) (60,193) 779,411 779,762 71.4 87.5 47.4 8.4 0.77
55.2 47.6 58.7 11.3 (30.7) (96.5) 44.3 43.2 21.4 320.9 50.7 21.6 19.8
Note: *gross profit margin = gross profit from operation / electricity sales Source: KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 3
YTD (% of 16E) 21.8 35.1 16.0 (5.9) 30.2 nm 16.8 10.9 15.5 10.9 17.3 9.6 8.9
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investment in the securities of KTB and ZMICO, investor should consider risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, PLE, TPOLY. KT ZMICO is a co‐underwriter of TPBI.
Anti‐corruption Progress Indicator
Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws. Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market returns over a six‐month period due to specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to be below market returns over a six‐month period due to specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months. NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 3
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KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.