EDL‐Generation Buy (15E TP LAK10,955/US$ 1.35)
Earnings Review
Close LAK6,250 / US$0.76 August 31, 2015
Beat forecast/ Below forecast / In line
Accelerating 2Q15 earnings as expected Price Performance (%)
Aug‐15
Feb‐15
Jan‐14
EDL‐Gen
Jul‐13
Jan‐13
Jul‐12
Jan‐12
Jul‐11
Jan‐11
LSX
Aug‐14
120% 100% 80% 60% 40% 20% 0% ‐20%
Source: Bloomberg, KT ZMICO Research Consensus EPS (Kip)
FY15 742.40
FY16 812.03
0.0
0.0
KT ZMICO vs. consensus Share data Reuters / Bloomberg
EDL.BK/EDL LS
Paid‐up Shares (m)
1,226.22
Par (USD, Kip)
0.49 / 4,000
Market cap (Kip bn/USDmn)
7,663.86 /937.99
Foreign limit / actual (%)
20.00 / 14.247
52 week High / Low (Kip)
8,100 / 6,250
Avg. daily T/O (shares 000) Estimated free float (%)
107.46 5.753
Beta
0.73
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).
Financials and Valuation
KT ZMICO is a selling agent of EDL‐Gen’s capital increase totaling 453.09mn shares through right offering and public offering with subscription period during 28 Aug. 2015 – 8 Sept. 2015 Patcharin Karsemarnuntana Analyst, no 17834
[email protected] 66 (0) 2695‐5837
Growth prospects intact We reaffirm our BUY call on EDL‐Gen on its earnings prospects driven by new power asset acquisitions through both “To‐do list” and “Wish‐list” projects with target equity capacity to end up at 1,794MW by 2018E. Meanwhile, its further capacity expansion is on the upside, underpinned by the promising power demand growth in the Greater Mekong Sub‐ region (GMS) with Lao PDR being targeted as the battery of Asia as the major regional power exporter. Moreover, its 2015‐16E PER, PBV and PBV/ROE still look undemanding, with a more attractive dividend yield and higher ROE compared to regional hydropower operators. Accelerating 2Q15 NP EDL‐Gen delivered 2Q15 NP of 189,994mn kip (flat YoY, +177% QoQ) and core profit of 181,776mn kip (‐5% YoY, +127% QoQ). On a YoY basis, the small drop in core profit was largely blamed on a lower profit contribution from affiliates, which offset the better performance at its seven 100%‐owned hydropower plants. Meanwhile, on a QoQ basis, the strong earnings improvement was attributable to 1) higher power generation at its seven wholly‐owned hydropower plants to 422.9GWh in 2Q15, +26% QoQ (compared to 1Q15 with a maintenance shutdown at its Xeset Dam) and 10% ahead of the company’s plan; and 2) a larger profit contribution from affiliates to 102,059mn kip, +142% QoQ with Theun Hinboun as the major contributor. Delivered higher margin in 2Q15; solid financial position The company delivered a higher GPM to 68% and a better EBITDA margin to 86% in 2Q15, thanks to larger electricity generation and controllable costs. Meanwhile, its debt to equity ran up slightly to 0.38x in 2Q15 given its US$200mn debentures issuance in late 2014 and the loan drawdown to facilitate its new power acquisition from EDL. Earnings forecasts maintained Given that its 1H15 NP represents 31% of our full‐year forecast and continued earnings acceleration in 2H15E driven by seasonal peak generation in 3Q15 and the start of new project contributions, we keep our 2015E NP forecast unchanged at 840,096mn kip. We reaffirm our forecasts calling for NP growth at 10% CAGR in 2015‐19E and EPS growth at 3% during the period due to the dilution effect from its capital increase. 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
2015E 880,827 840,096 578.28 500.26 (32.4) 347 5,558
2016E 1,794,139 1,044,174 621.79 621.79 24.3 373 5,806
2017E 1,992,105 1,246,716 742.40 742.40 19.4 445 6,103
2018E 2,136,700 1,363,650 812.03 812.03 9.4 487 6,428
2014 8.4 7.5 1.2 7.2 14.7 14.6
2015E 12.5 11.3 1.1 5.6 10.7 32.1
2016E 10.1 9.4 1.1 6.0 10.9 88.2
2017E 8.4 8.1 1.0 7.1 12.5 82.7
2018E 7.7 7.8 1.0 7.8 13.0 86.9
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 3
Figure 1: EDL‐Gen’s 2Q15 earnings review unit: mn kip Electricity sales Cost of sales Gross profit Profit from associates & JV Other income Currency exchange gains Total revenue Gain before expenses Administrative expenses Finance costs Income tax Net profit Core profit EPS (weighted) Gross profit margin* (%) EBITDA margin (%) Net profit margin (%) ROE (%) Debt/equity ratio (x)
2Q14
1Q15
2Q15
160,119 (64,026) 96,093 123,661 1,614 (3,533) 281,861 217,835 (21,413) (5,525) (3,540) 187,357 190,890 152.8 60.0 85.4 66.5 12.4 0.15
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 55.9 55.5 78.5 39.1 4.3 0.34
179,215 (57,739) 121,476 102,059 8,946 8,218 298,438 240,699 (31,275) (9,541) (9,889) 189,994 181,776 155.0 67.8 86.2 63.7 12.0 0.38
% YoY 11.9 (9.8) 26.4 (17.5) 454.3 nm 5.9 10.5 46.1 72.7 179.4 1.4 (4.8) 1.4
% QoQ 26.0 (8.8) 53.9 142.1 259.3 nm 70.2 114.8 44.3 (49.2) 225.9 177.1 126.9 177.1
Note: gross profit margin = gross profit from operation / electricity sales Source: KT ZMICO Research
% YoY 4.5 12.0 0.4 (25.0) 360.0 (41.8) (4.6) (9.2) 30.4 105.5 77.1 (20.9) (21.3) (20.9)
1H15 321,497 (121,071) 200,426 144,207 11,436 (3,313) 473,827 352,756 (52,955) (28,313) (12,923) 258,565 261,878 210.9 62.3 83.4 54.6 8.3 0.38
2015E 880,827 (234,613) 646,215 485,612 6,323 (2,167) 1,370,596 1,135,983 (126,923) (120,119) (48,845) 840,096 842,263 578.28 75.3 87.5 61.3 10.7 0.43
% YoY 5.0 4.1 5.3 2.3 11.3 (88.0) 5.3 5.6 2.7 278.7 115.2 (7.4) (9.0) (21.9)
YTD (% of 15E) 36.5 51.6 31.0 29.7 180.9 152.9 34.6 31.1 41.7 23.6 26.5 30.8 31.1 36.5
Figure 2: EDL‐Gen’s valuation comparison with regional hydropower operators NAME
Mkt Cap
PER (x)
P/BV (x)
Yield (%)
ROE (%)
EV/EBITDA (x)
PBV/ROE (x)
(US$Mn)
15E
16E
15E
16E
15E
16E
15E
16E
15E
16E
15E
16E
VERBUND AG AUSTRIA
5,033
20.12 20.12
20.77 20.77
0.93 0.93
0.92 0.92
2.59 2.59
2.44 2.44
4.92 4.92
4.45 4.45
9.82 9.82
10.22 10.22
0.19 0.19
0.21 0.21
BROOKFIELD RENEWABLE*
4,180
101.20
38.15
1.60
1.60
5.70
6.05
1.44
3.27
13.77
12.19
1.11
0.49
101.20
38.15
1.60
1.60
5.70
6.05
1.44
3.27
13.77
12.19
1.11
0.49
TRACTEBEL ENERGIA SA
6,130
21.77
11.43
3.76
3.52
3.28
7.29
17.01
31.16
9.94
6.43
0.22
0.11
AES TIETE SA‐PREF*
1,649
10.19
11.53
3.97
4.27
8.81
9.85
40.47
34.95
6.11
6.43
0.10
0.12 0.12
BERMUDA
15.98
11.48
3.86
3.90
6.04
8.57
28.74
33.05
8.03
6.43
0.16
INNERGEX RENEWABLE*
BRAZIL
826
69.68
54.00
na
na
5.74
5.93
na
na
17.74
15.93
na
na
ALTERRA POWER CORP
160
14.77
10.29
0.77
0.72
na
na
7.00
12.00
15.68
11.49
0.11
0.06
CANADA NHPC LTD* JAIPRAKASH POWER* INDIA RUSHYDRO PJSC* RUSSIA CK POWER PCL THAILAND EDL‐GENERATION PCL* LAOS AVERAGE
42.22
32.15
0.77
0.72
5.74
5.93
7.00
12.00
16.71
13.71
0.11
0.06
2,827
8.80
7.76
0.71
0.59
3.03
3.43
8.44
7.91
7.46
7.06
0.08
0.07
262
20.10
na
0.47
0.28
na
0.00
2.37
2.16
10.78
8.39
0.20
0.13
14.45
7.76
0.59
0.43
3.03
1.72
5.41
5.03
9.12
7.73
0.14
0.10
3,135
5.03
4.93
0.31
0.30
3.75
3.75
5.63
5.18
4.73
4.23
0.06
0.06
5.03
4.93
0.31
0.30
3.75
3.75
5.63
5.18
4.73
4.23
0.06
0.06
514
43.01
39.14
1.03
1.01
0.93
1.02
2.85
2.60
9.35
9.92
0.36
0.39
43.01
39.14
1.03
1.01
0.93
1.02
2.85
2.60
9.35
9.92
0.36
0.39
938
12.49
10.05
1.12
1.08
5.55
5.97
10.73
10.94
11.26
9.39
0.10
0.10
12.49 31.81
10.05 20.55
1.12 1.28
1.08 1.24
5.55 4.17
5.97 4.43
10.73 8.34
10.94 9.57
11.26 10.35
9.39 9.23
0.10 0.28
0.10 0.19
Source: KT ZMICO Research, Bloomberg Note:* pure hydropower operators
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 3
Note: KT ZMICO is a partnership between KTB and ZMICO An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO KT ZMICO is a financial advisor for GPSC, U, LOXLEY, SUTHA, ZMICO, MAKRO, CPALL, PLE KT ZMICO is a co‐underwriter of ASEFA
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
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4 Floor, Forum Plaza Bldg.,
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T.Namuang, A.Muang,
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A. Banglamung, Cholburi 20260
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Telephone: (038) 362-420-9
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Telephone: (043) 389-171-193
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Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
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22/61-63, Luang Por Wat Chalong Road,
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Bangkok 10330
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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.