Weakening 3Q15 profit YoY; LT growth ...
EDL‐Generation Buy (16E TP LAK11,483/US$1.41)
Company Update
Close LAK6,300 / US$0.77
Earnings upgrade/Earnings downgrade/Overview unchanged
November 19, 2015
Weakening 3Q15 profit YoY; LT growth prospects intact Price Performance (%)
Nov‐15
Apr‐15
Oct‐14
Sep‐13
EDL‐Gen
Mar‐13
Aug‐12
Feb‐12
Jul‐11
Jan‐11
LSX
Mar‐14
120% 100% 80% 60% 40% 20% 0% ‐20%
Source: Bloomberg, KT ZMICO Research Consensus EPS (Kip)
FY15
FY16
578.28
621.79
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)
10,579.61 /1,294.70
Foreign limit / actual (%)
25.00 / 13.8185
52 week High / Low (Kip)
8,100 / 6,050
Avg. daily T/O (shares 000) Estimated free float (%)
111.08 11.1815
Beta
0.74
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).
2015E forecasts remain at risk; LT earnings prospects still on an uptrend
Given that its 9M15 core profit and NP represented 64.5% and 63% of our full‐year forecasts, our 2015E forecasts remain at risk for a possible downgrade if power generation cannot ramp up in 4Q15E, particularly in the case of affiliates. However, we retain our view calling for its LT earnings prospects to be on an uptrend driven by the contribution of new power asset acquisitions through both “To‐do list” and “Wish‐list” projects. 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 the subscription period during 28 Aug. 2015 – 8 Sept. 2015. Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
ST pain from less water inflow; LT growth prospects still intact Despite the downbeat 3Q15 earnings leading to our revisit of the full‐ year forecasts, EDL‐Gen’s share price has not reacted negatively as it’s currently trading at undemanding valuation against regional hydropower operators and at a deep discount to the TP (vs. our rolled‐ over 2016E TP of 11,483 kip). Moreover, its long‐term earnings prospects are intact driven by new power asset acquisitions through both “To‐do list” and “Wish‐list” projects with targeted equity capacity to end up at 1,794MW by 2018E. Meanwhile, its further capacity expansion is on the upside, facilitated by its strong financial position following its recent capital increase, as well as the promising power demand growth in the Greater Mekong Sub‐region (GMS), with Lao PDR as the battery of Asia. Weakening 3Q15 profit YoY, both from its 100%‐owned and affiliates EDL‐Gen delivered 3Q15 NP of 274,155mn kip (‐27% YoY, +44% QoQ), and core profit of 281,011mn kip (‐24% YoY, +55% QoQ). On a YoY basis, the sharp drop in core profit was largely blamed on the lower profit contribution from both its seven 100%‐owned hydropower plants to 161,858mn kip (‐31% YoY), and from affiliates to 119,153mn kip (‐10% YoY), with their smaller power generation as the main weakness. Meanwhile, the core profit acceleration QoQ was mostly attributable to the seasonal impact, i.e., normal peak power generation in 3Q, but not a good record this year due to delayed and declining rainfall. Note that its seven wholly‐owned hydropower plants marked power generation of 713GWh in 3Q15 (‐13% YoY, but +69% QoQ), which was a 9% shortfall from its plan (780GWh); nevertheless, the 9M15 figure of 1,471.5GWh was quite on par with the plan (1,473.2GWh). The same picture was seen for its affiliates with lower power generation following less water inflow.
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 8.5 7.6 1.2 7.1 14.7 14.6
2015E 12.6 11.3 1.1 5.5 10.7 32.1
2016E 10.1 9.4 1.1 5.9 10.9 88.2
2017E 8.5 8.1 1.0 7.1 12.5 82.7
2018E 7.8 7.9 1.0 7.7 13.0 86.9
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: EDL‐Gen’s 3Q15 earnings review unit: mn Kip 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 EPS (weighted) Gross profit margin (%)* EBITDA margin (%) Net profit margin (%) ROE (%) Interest‐bearing debt/Equity (x)
3Q14
2Q15
3Q15
% YoY
% QoQ
9M15
% YoY
2015E
% YoY
345,452 (57,225) 288,227
179,215 (57,739) 121,476
303,607 (80,896) 222,711
(12.1) 41.4 (22.7)
69.4 40.1 83.3
625,104 (201,967) 423,137
(4.3) 22.2 (13.3)
880,827 (234,613) 646,215
5.0 4.1 5.3
YTD % of 15E) 71.0 86.1 65.5
132,901
102,059
119,153
(10.3)
16.7
263,360
(19.0)
485,612
2.3
54.2
2,118 7,205 487,676 430,451 (36,445) (6,472) (12,698) 374,836 367,631 305.7 83.4 89.4 76.9 24.8
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
3,175 (6,856) 419,079 338,183 (30,030) (16,754) (17,244) 274,155 281,011 185.6 73.4 90.1 65.4 14.4
49.9 nm (14.1) (21.4) (17.6) 158.9 35.8 (26.9) (23.6) (39.3)
(64.5) nm 40.4 40.5 (4.0) 75.6 74.4 44.3 54.6 19.8
14,611 (10,169) 892,906 690,939 (82,985) (45,067) (30,167) 532,720 542,889 396.5 67.7 86.6 59.7 7.9
217.4 nm (9.3) (15.6) 7.7 122.6 50.9 (24.1) (22.5) (30.7)
6,323 (2,167) 1,370,596 1,135,983 (126,923) (120,119) (48,845) 840,096 842,263 578.3 75.3 87.5 61.3 10.7
11.3 (88.0) 5.3 5.6 2.7 278.7 115.2 (7.4) (9.0) (21.9)
231.1 469.3 65.1 60.8 65.4 37.5 61.8 63.4 64.5 68.6
0.16
0.38
0.28
Note: *gross profit margin = gross profit from operation / electricity sales Source: KT ZMICO Research
0.28
0.43
Figure 2: Summary of EDL‐Gen’s 2016E TP valuation Source: KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: EDL‐Gen’s valuation comparison with regional hydropower operators NAME VERBUND AG AUSTRIA BROOKFIELD RENEWABLE* CANADA TRACTEBEL ENERGIA SA AES TIETE SA‐PREF* BRAZIL INNERGEX RENEWABLE* ALTERRA POWER CORP CANADA CHINA YANGTZE POWER* CHINA NHPC LTD* JAIPRAKASH POWER* INDIA RUSHYDRO JSC* RUSSIA CK POWER PCL THAILAND EDL‐GENERATION PCL* LAOS AVERAGE
Mkt Cap PER (x) (US$Mn) 15E 16E 5,038 19.21 21.60 19.21 21.60 3,605 142.92 44.44 142.92 44.44 6,054 20.10 12.90 1,361 7.17 9.35 13.64 11.12 842 76.64 52.60 152 24.87 8.08 50.75 30.34 34,740 18.54 17.82 18.54 17.82 3,117 8.80 8.28 310 n.a. n.a. 8.80 8.28 3,515 5.39 5.16 5.39 5.16 496 41.63 37.89 41.63 37.89 945 12.59 10.13 12.59 10.13 21.32 20.75
P/BV (x) 15E 16E 0.98 0.96 0.98 0.96 1.14 1.16 1.14 1.16 3.77 3.45 3.47 3.59 3.62 3.52 3.17 3.43 0.70 0.66 1.94 2.04 2.41 2.07 2.41 2.07 0.71 0.64 0.47 0.33 0.59 0.48 0.35 0.37 0.35 0.37 0.99 0.98 0.99 0.98 1.13 1.09 1.13 1.09 1.46 1.41
Yield (%) 15E 16E 2.64 2.33 2.64 2.33 6.60 7.02 6.60 7.02 3.61 5.75 11.57 11.59 7.59 8.67 5.78 5.90 n.a. n.a. 5.78 5.90 2.78 3.26 2.78 3.26 3.03 3.34 0.00 0.00 1.52 1.67 3.57 4.42 3.57 4.42 0.96 1.06 0.96 1.06 5.51 5.92 5.51 5.92 4.11 4.47
ROE (%) 15E 16E 5.21 4.44 5.21 4.44 1.62 3.51 1.62 3.51 18.62 26.59 46.08 36.76 32.35 31.67 n.a. n.a. 9.00 11.00 9.00 11.00 13.98 14.30 13.98 14.30 8.44 8.08 2.37 1.05 5.41 4.56 6.01 6.49 6.01 6.49 2.85 2.60 2.85 2.60 10.73 10.94 10.73 10.94 9.68 9.95
EV/EBITDA (x) 15E 16E 9.72 10.43 9.72 10.43 13.82 12.25 13.82 12.25 9.58 6.99 4.60 5.35 7.09 6.17 17.82 16.04 13.51 11.21 15.67 13.62 12.68 12.11 12.68 12.11 7.46 7.26 16.34 10.10 11.90 8.68 5.17 4.48 5.17 4.48 9.19 9.76 9.19 9.76 11.33 9.43 11.33 9.43 10.73 9.66
Source: KT ZMICO Research, Bloomberg Note: *pure hydropower operators
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 6
PBV/ROE (x) 15E 16E 0.19 0.22 0.19 0.22 0.71 0.33 0.71 0.33 0.20 0.13 0.08 0.10 0.14 0.11 n.a. n.a. 0.08 0.06 0.08 0.06 0.17 0.14 0.17 0.14 0.08 0.08 0.20 0.32 0.14 0.20 0.06 0.06 0.06 0.06 0.35 0.38 0.35 0.38 0.11 0.10 0.11 0.10 0.22 0.18
Financial tables Financial Summary Consolidated Income Statement Electricity sales Cost of sales Gross profit Profit from associates and JV Other income Currency exchange gains Total revenue Gain before expenses Administrative expenses Profit before financial costs and tax Finance costs Income tax Net profit Core profit EPS (weighted) – Kip EPS (FD) – Kip
mn Kip
2014
2015E
2016E
2017E
2018E
2019E
839,193 (225,285) 613,908 474,467 5,680 (18,098) 1,301,242 1,075,957 (123,528) 952,429 (31,722) (22,695) 907,684 925,782 740.36 740.23
880,827 (234,613) 646,215 485,612 6,323 (2,167) 1,370,596 1,135,983 (126,923) 1,009,060 (120,119) (48,845) 840,096 842,263 578.28 500.26
1,794,139 (550,750) 1,243,389 497,428 6,323 (30,067) 2,267,823 1,717,073 (161,417) 1,555,656 (439,539) (71,944) 1,044,174 1,074,241 621.79 621.79
1,992,105 (603,269) 1,388,836 600,914 6,523 0 2,599,542 1,996,273 (179,808) 1,816,465 (488,497) (81,253) 1,246,716 1,246,716 742.40 742.40
2,136,700 (651,186) 1,485,514 670,837 6,523 0 2,814,060 2,162,874 (197,308) 1,965,567 (515,379) (86,538) 1,363,650 1,363,650 812.03 812.03
2,181,549 (667,775) 1,513,774 741,951 6,523 0 2,930,024 2,262,249 (204,965) 2,057,284 (508,461) (89,152) 1,459,671 1,459,671 869.21 869.21
Consolidated Balance Sheets Cash and cash equivalents Current assets Property, plant and equipment‐Net Investment JV and associates Non‐current assets Total assets
1,251,534 1,785,554 4,145,851 2,108,966 780,890 8,821,261
1,051,205 1,608,358 7,332,732 3,511,186 1,216,410 13,668,686
1,569,580 2,678,691 13,885,227 3,749,986 2,078 20,315,982
1,958,455 3,184,319 13,378,316 4,506,352 2,182 21,071,169
1,712,487 2,906,490 14,281,781 5,105,737 2,291 22,296,299
2,554,069 3,770,696 13,717,637 5,380,400 2,406 22,871,138
Current liabilities Long term loans Non‐current liabilities Total liabilities Paid up capital Retained earnings Total equities
413,390 2,075,125 11,105 2,499,620 4,904,867 978,811 6,321,641
467,168 3,868,442 0 4,335,609 6,717,215 1,236,247 9,333,077
549,674 10,015,562 0 10,565,236 6,717,215 1,653,099 9,750,746
1,170,870 9,650,866 0 10,821,736 6,717,215 2,102,724 10,249,433
884,058 10,617,349 0 11,501,407 6,717,215 2,599,206 10,794,893
1,430,840 10,061,537 0 11,492,378 6,717,215 3,134,750 11,378,761
907,684 181,555 18,098 203,145 (316,297) (6,990) 452,197 1,219,248 (551,798) 0 0 1,119,647 159,914 1,251,534
840,096 189,529 2,167 (52,135) (3,376,410) (1,218,547) (4,234,493) 1,873,930 (582,661) 2,754,000 0 (189,224) 1,251,534 1,051,205
1,044,174 477,299 30,067 (441,818) (7,029,795) (36,168) (4,944,540) 6,089,419 (626,504) 0 0 518,375 1,051,205 1,569,580
1,246,716 522,840 0 (129,543) (15,929) (500,527) 867,614 269,290 (748,030) 0 0 388,875 1,569,580 1,958,455
1,363,650 567,289 0 59,860 (1,470,754) (285,212) (79,450) 651,672 (818,190) 0 0 (245,968) 1,958,455 1,712,487
1,459,671 582,747 0 (12,869) (18,602) 88,900 1,736,169 (18,785) (875,803) 0 0 841,582 1,712,487 2,554,069
Cash flow Net earnings DD&A Unrealized FX Gain (Loss) Change in working capital Capex Investments in affiliates Free cash flows Debt Financing Dividend paid Capital increase Others Net cash flows Cash equivalents ‐beginning Cash equivalents ‐ending
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 6
Financial Summary Per share data and financial ratio EV ‐ fully diluted EPS ‐ fully diluted EPS ‐ weighted DPS BV PER (x) PBV (x) EV/EBITDA (x) Div. yield (%) Div. payout ratio (%)
2014
2015E
2016E
2017E
2018E
2019E
7,052.8 740.2 740.4 450.0 5,155.4 8.5 1.2 7.6 7.1 60.8
8,086.2 500.3 578.3 347.0 5,557.7 12.6 1.1 11.3 5.5 69.4
11,421.6 621.8 621.8 373.1 5,806.4 10.1 1.1 9.4 5.9 60.0
11,350.3 742.4 742.4 445.4 6,103.4 8.5 1.0 8.1 7.1 60.0
11,884.9 812.0 812.0 487.2 6,428.2 7.8 1.0 7.9 7.7 60.0
11,372.5 869.2 869.2 521.5 6,775.9 7.2 0.9 7.2 8.3 60.0
Percentage Growth (%) Sales Growth Normalized Profit Growth Net Profit Growth EPS growth ‐ FD (%) EBITDA Growth
(2.7) (2.3) (6.6) (6.6) (4.5)
5.0 (9.0) (7.4) (32.4) 4.8
103.7 27.5 24.3 24.3 69.6
11.0 16.1 19.4 19.4 15.1
7.3 9.4 9.4 9.4 8.3
2.1 7.0 7.0 7.0 4.2
Profitability Ratio (%) Gross profit margin EBIT margin EBITDA margin Net profit margin ROE ROA ROCE
75.2 73.9 87.9 69.8 14.7 11.4 11.9
75.3 73.6 87.5 61.3 10.7 7.5 7.8
70.8 68.6 89.6 46.0 10.9 6.1 6.3
71.2 69.9 90.0 48.0 12.5 6.0 6.3
70.9 69.8 90.0 48.5 13.0 6.3 6.6
70.8 70.2 90.1 49.8 13.2 6.5 6.8
4.3 4.3 3.0 0.2
3.4 3.4 2.3 0.1
4.9 4.9 2.9 0.1
2.7 2.7 1.7 0.1
3.3 3.3 1.9 0.1
2.6 2.6 1.8 0.1
0.4 0.3 30.3 8.7 1.4 0.1 0.8
0.5 0.4 8.4 4.9 1.5 0.3 2.5
1.1 1.0 3.5 3.6 2.1 0.9 4.2
1.1 1.0 3.7 2.7 2.1 0.8 3.6
1.1 1.0 3.8 2.7 2.1 0.9 3.7
1.0 1.0 4.0 1.8 2.0 0.7 3.2
S‐T SOLVENCY OR LIQUIDITY RATIOS (x) Current ratio Quick ratio Cash ratio Net working capital to total assets L‐T SOLVENCY OR FINANCIAL LEVERAGE Total debt/Equity ratio Interest bearing debt/Equity ratio Interest coverage ratio Debt service coverage ratio Asset/Equity (Equity multiplier) Net debt/Equity Net debt/EBITDA
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 6
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 return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of 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 6 of 6
Company Update
Close LAK6,300 / US$0.77
Earnings upgrade/Earnings downgrade/Overview unchanged
November 19, 2015
Weakening 3Q15 profit YoY; LT growth prospects intact Price Performance (%)
Nov‐15
Apr‐15
Oct‐14
Sep‐13
EDL‐Gen
Mar‐13
Aug‐12
Feb‐12
Jul‐11
Jan‐11
LSX
Mar‐14
120% 100% 80% 60% 40% 20% 0% ‐20%
Source: Bloomberg, KT ZMICO Research Consensus EPS (Kip)
FY15
FY16
578.28
621.79
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)
10,579.61 /1,294.70
Foreign limit / actual (%)
25.00 / 13.8185
52 week High / Low (Kip)
8,100 / 6,050
Avg. daily T/O (shares 000) Estimated free float (%)
111.08 11.1815
Beta
0.74
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).
2015E forecasts remain at risk; LT earnings prospects still on an uptrend
Given that its 9M15 core profit and NP represented 64.5% and 63% of our full‐year forecasts, our 2015E forecasts remain at risk for a possible downgrade if power generation cannot ramp up in 4Q15E, particularly in the case of affiliates. However, we retain our view calling for its LT earnings prospects to be on an uptrend driven by the contribution of new power asset acquisitions through both “To‐do list” and “Wish‐list” projects. 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 the subscription period during 28 Aug. 2015 – 8 Sept. 2015. Patcharin Karsemarnuntana Analyst, no 17834 [email protected] 66 (0) 2695‐5837
ST pain from less water inflow; LT growth prospects still intact Despite the downbeat 3Q15 earnings leading to our revisit of the full‐ year forecasts, EDL‐Gen’s share price has not reacted negatively as it’s currently trading at undemanding valuation against regional hydropower operators and at a deep discount to the TP (vs. our rolled‐ over 2016E TP of 11,483 kip). Moreover, its long‐term earnings prospects are intact driven by new power asset acquisitions through both “To‐do list” and “Wish‐list” projects with targeted equity capacity to end up at 1,794MW by 2018E. Meanwhile, its further capacity expansion is on the upside, facilitated by its strong financial position following its recent capital increase, as well as the promising power demand growth in the Greater Mekong Sub‐region (GMS), with Lao PDR as the battery of Asia. Weakening 3Q15 profit YoY, both from its 100%‐owned and affiliates EDL‐Gen delivered 3Q15 NP of 274,155mn kip (‐27% YoY, +44% QoQ), and core profit of 281,011mn kip (‐24% YoY, +55% QoQ). On a YoY basis, the sharp drop in core profit was largely blamed on the lower profit contribution from both its seven 100%‐owned hydropower plants to 161,858mn kip (‐31% YoY), and from affiliates to 119,153mn kip (‐10% YoY), with their smaller power generation as the main weakness. Meanwhile, the core profit acceleration QoQ was mostly attributable to the seasonal impact, i.e., normal peak power generation in 3Q, but not a good record this year due to delayed and declining rainfall. Note that its seven wholly‐owned hydropower plants marked power generation of 713GWh in 3Q15 (‐13% YoY, but +69% QoQ), which was a 9% shortfall from its plan (780GWh); nevertheless, the 9M15 figure of 1,471.5GWh was quite on par with the plan (1,473.2GWh). The same picture was seen for its affiliates with lower power generation following less water inflow.
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 8.5 7.6 1.2 7.1 14.7 14.6
2015E 12.6 11.3 1.1 5.5 10.7 32.1
2016E 10.1 9.4 1.1 5.9 10.9 88.2
2017E 8.5 8.1 1.0 7.1 12.5 82.7
2018E 7.8 7.9 1.0 7.7 13.0 86.9
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 6
Figure 1: EDL‐Gen’s 3Q15 earnings review unit: mn Kip 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 EPS (weighted) Gross profit margin (%)* EBITDA margin (%) Net profit margin (%) ROE (%) Interest‐bearing debt/Equity (x)
3Q14
2Q15
3Q15
% YoY
% QoQ
9M15
% YoY
2015E
% YoY
345,452 (57,225) 288,227
179,215 (57,739) 121,476
303,607 (80,896) 222,711
(12.1) 41.4 (22.7)
69.4 40.1 83.3
625,104 (201,967) 423,137
(4.3) 22.2 (13.3)
880,827 (234,613) 646,215
5.0 4.1 5.3
YTD % of 15E) 71.0 86.1 65.5
132,901
102,059
119,153
(10.3)
16.7
263,360
(19.0)
485,612
2.3
54.2
2,118 7,205 487,676 430,451 (36,445) (6,472) (12,698) 374,836 367,631 305.7 83.4 89.4 76.9 24.8
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
3,175 (6,856) 419,079 338,183 (30,030) (16,754) (17,244) 274,155 281,011 185.6 73.4 90.1 65.4 14.4
49.9 nm (14.1) (21.4) (17.6) 158.9 35.8 (26.9) (23.6) (39.3)
(64.5) nm 40.4 40.5 (4.0) 75.6 74.4 44.3 54.6 19.8
14,611 (10,169) 892,906 690,939 (82,985) (45,067) (30,167) 532,720 542,889 396.5 67.7 86.6 59.7 7.9
217.4 nm (9.3) (15.6) 7.7 122.6 50.9 (24.1) (22.5) (30.7)
6,323 (2,167) 1,370,596 1,135,983 (126,923) (120,119) (48,845) 840,096 842,263 578.3 75.3 87.5 61.3 10.7
11.3 (88.0) 5.3 5.6 2.7 278.7 115.2 (7.4) (9.0) (21.9)
231.1 469.3 65.1 60.8 65.4 37.5 61.8 63.4 64.5 68.6
0.16
0.38
0.28
Note: *gross profit margin = gross profit from operation / electricity sales Source: KT ZMICO Research
0.28
0.43
Figure 2: Summary of EDL‐Gen’s 2016E TP valuation Source: KT ZMICO Research REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 6
Figure 3: EDL‐Gen’s valuation comparison with regional hydropower operators NAME VERBUND AG AUSTRIA BROOKFIELD RENEWABLE* CANADA TRACTEBEL ENERGIA SA AES TIETE SA‐PREF* BRAZIL INNERGEX RENEWABLE* ALTERRA POWER CORP CANADA CHINA YANGTZE POWER* CHINA NHPC LTD* JAIPRAKASH POWER* INDIA RUSHYDRO JSC* RUSSIA CK POWER PCL THAILAND EDL‐GENERATION PCL* LAOS AVERAGE
Mkt Cap PER (x) (US$Mn) 15E 16E 5,038 19.21 21.60 19.21 21.60 3,605 142.92 44.44 142.92 44.44 6,054 20.10 12.90 1,361 7.17 9.35 13.64 11.12 842 76.64 52.60 152 24.87 8.08 50.75 30.34 34,740 18.54 17.82 18.54 17.82 3,117 8.80 8.28 310 n.a. n.a. 8.80 8.28 3,515 5.39 5.16 5.39 5.16 496 41.63 37.89 41.63 37.89 945 12.59 10.13 12.59 10.13 21.32 20.75
P/BV (x) 15E 16E 0.98 0.96 0.98 0.96 1.14 1.16 1.14 1.16 3.77 3.45 3.47 3.59 3.62 3.52 3.17 3.43 0.70 0.66 1.94 2.04 2.41 2.07 2.41 2.07 0.71 0.64 0.47 0.33 0.59 0.48 0.35 0.37 0.35 0.37 0.99 0.98 0.99 0.98 1.13 1.09 1.13 1.09 1.46 1.41
Yield (%) 15E 16E 2.64 2.33 2.64 2.33 6.60 7.02 6.60 7.02 3.61 5.75 11.57 11.59 7.59 8.67 5.78 5.90 n.a. n.a. 5.78 5.90 2.78 3.26 2.78 3.26 3.03 3.34 0.00 0.00 1.52 1.67 3.57 4.42 3.57 4.42 0.96 1.06 0.96 1.06 5.51 5.92 5.51 5.92 4.11 4.47
ROE (%) 15E 16E 5.21 4.44 5.21 4.44 1.62 3.51 1.62 3.51 18.62 26.59 46.08 36.76 32.35 31.67 n.a. n.a. 9.00 11.00 9.00 11.00 13.98 14.30 13.98 14.30 8.44 8.08 2.37 1.05 5.41 4.56 6.01 6.49 6.01 6.49 2.85 2.60 2.85 2.60 10.73 10.94 10.73 10.94 9.68 9.95
EV/EBITDA (x) 15E 16E 9.72 10.43 9.72 10.43 13.82 12.25 13.82 12.25 9.58 6.99 4.60 5.35 7.09 6.17 17.82 16.04 13.51 11.21 15.67 13.62 12.68 12.11 12.68 12.11 7.46 7.26 16.34 10.10 11.90 8.68 5.17 4.48 5.17 4.48 9.19 9.76 9.19 9.76 11.33 9.43 11.33 9.43 10.73 9.66
Source: KT ZMICO Research, Bloomberg Note: *pure hydropower operators
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PBV/ROE (x) 15E 16E 0.19 0.22 0.19 0.22 0.71 0.33 0.71 0.33 0.20 0.13 0.08 0.10 0.14 0.11 n.a. n.a. 0.08 0.06 0.08 0.06 0.17 0.14 0.17 0.14 0.08 0.08 0.20 0.32 0.14 0.20 0.06 0.06 0.06 0.06 0.35 0.38 0.35 0.38 0.11 0.10 0.11 0.10 0.22 0.18
Financial tables Financial Summary Consolidated Income Statement Electricity sales Cost of sales Gross profit Profit from associates and JV Other income Currency exchange gains Total revenue Gain before expenses Administrative expenses Profit before financial costs and tax Finance costs Income tax Net profit Core profit EPS (weighted) – Kip EPS (FD) – Kip
mn Kip
2014
2015E
2016E
2017E
2018E
2019E
839,193 (225,285) 613,908 474,467 5,680 (18,098) 1,301,242 1,075,957 (123,528) 952,429 (31,722) (22,695) 907,684 925,782 740.36 740.23
880,827 (234,613) 646,215 485,612 6,323 (2,167) 1,370,596 1,135,983 (126,923) 1,009,060 (120,119) (48,845) 840,096 842,263 578.28 500.26
1,794,139 (550,750) 1,243,389 497,428 6,323 (30,067) 2,267,823 1,717,073 (161,417) 1,555,656 (439,539) (71,944) 1,044,174 1,074,241 621.79 621.79
1,992,105 (603,269) 1,388,836 600,914 6,523 0 2,599,542 1,996,273 (179,808) 1,816,465 (488,497) (81,253) 1,246,716 1,246,716 742.40 742.40
2,136,700 (651,186) 1,485,514 670,837 6,523 0 2,814,060 2,162,874 (197,308) 1,965,567 (515,379) (86,538) 1,363,650 1,363,650 812.03 812.03
2,181,549 (667,775) 1,513,774 741,951 6,523 0 2,930,024 2,262,249 (204,965) 2,057,284 (508,461) (89,152) 1,459,671 1,459,671 869.21 869.21
Consolidated Balance Sheets Cash and cash equivalents Current assets Property, plant and equipment‐Net Investment JV and associates Non‐current assets Total assets
1,251,534 1,785,554 4,145,851 2,108,966 780,890 8,821,261
1,051,205 1,608,358 7,332,732 3,511,186 1,216,410 13,668,686
1,569,580 2,678,691 13,885,227 3,749,986 2,078 20,315,982
1,958,455 3,184,319 13,378,316 4,506,352 2,182 21,071,169
1,712,487 2,906,490 14,281,781 5,105,737 2,291 22,296,299
2,554,069 3,770,696 13,717,637 5,380,400 2,406 22,871,138
Current liabilities Long term loans Non‐current liabilities Total liabilities Paid up capital Retained earnings Total equities
413,390 2,075,125 11,105 2,499,620 4,904,867 978,811 6,321,641
467,168 3,868,442 0 4,335,609 6,717,215 1,236,247 9,333,077
549,674 10,015,562 0 10,565,236 6,717,215 1,653,099 9,750,746
1,170,870 9,650,866 0 10,821,736 6,717,215 2,102,724 10,249,433
884,058 10,617,349 0 11,501,407 6,717,215 2,599,206 10,794,893
1,430,840 10,061,537 0 11,492,378 6,717,215 3,134,750 11,378,761
907,684 181,555 18,098 203,145 (316,297) (6,990) 452,197 1,219,248 (551,798) 0 0 1,119,647 159,914 1,251,534
840,096 189,529 2,167 (52,135) (3,376,410) (1,218,547) (4,234,493) 1,873,930 (582,661) 2,754,000 0 (189,224) 1,251,534 1,051,205
1,044,174 477,299 30,067 (441,818) (7,029,795) (36,168) (4,944,540) 6,089,419 (626,504) 0 0 518,375 1,051,205 1,569,580
1,246,716 522,840 0 (129,543) (15,929) (500,527) 867,614 269,290 (748,030) 0 0 388,875 1,569,580 1,958,455
1,363,650 567,289 0 59,860 (1,470,754) (285,212) (79,450) 651,672 (818,190) 0 0 (245,968) 1,958,455 1,712,487
1,459,671 582,747 0 (12,869) (18,602) 88,900 1,736,169 (18,785) (875,803) 0 0 841,582 1,712,487 2,554,069
Cash flow Net earnings DD&A Unrealized FX Gain (Loss) Change in working capital Capex Investments in affiliates Free cash flows Debt Financing Dividend paid Capital increase Others Net cash flows Cash equivalents ‐beginning Cash equivalents ‐ending
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Financial Summary Per share data and financial ratio EV ‐ fully diluted EPS ‐ fully diluted EPS ‐ weighted DPS BV PER (x) PBV (x) EV/EBITDA (x) Div. yield (%) Div. payout ratio (%)
2014
2015E
2016E
2017E
2018E
2019E
7,052.8 740.2 740.4 450.0 5,155.4 8.5 1.2 7.6 7.1 60.8
8,086.2 500.3 578.3 347.0 5,557.7 12.6 1.1 11.3 5.5 69.4
11,421.6 621.8 621.8 373.1 5,806.4 10.1 1.1 9.4 5.9 60.0
11,350.3 742.4 742.4 445.4 6,103.4 8.5 1.0 8.1 7.1 60.0
11,884.9 812.0 812.0 487.2 6,428.2 7.8 1.0 7.9 7.7 60.0
11,372.5 869.2 869.2 521.5 6,775.9 7.2 0.9 7.2 8.3 60.0
Percentage Growth (%) Sales Growth Normalized Profit Growth Net Profit Growth EPS growth ‐ FD (%) EBITDA Growth
(2.7) (2.3) (6.6) (6.6) (4.5)
5.0 (9.0) (7.4) (32.4) 4.8
103.7 27.5 24.3 24.3 69.6
11.0 16.1 19.4 19.4 15.1
7.3 9.4 9.4 9.4 8.3
2.1 7.0 7.0 7.0 4.2
Profitability Ratio (%) Gross profit margin EBIT margin EBITDA margin Net profit margin ROE ROA ROCE
75.2 73.9 87.9 69.8 14.7 11.4 11.9
75.3 73.6 87.5 61.3 10.7 7.5 7.8
70.8 68.6 89.6 46.0 10.9 6.1 6.3
71.2 69.9 90.0 48.0 12.5 6.0 6.3
70.9 69.8 90.0 48.5 13.0 6.3 6.6
70.8 70.2 90.1 49.8 13.2 6.5 6.8
4.3 4.3 3.0 0.2
3.4 3.4 2.3 0.1
4.9 4.9 2.9 0.1
2.7 2.7 1.7 0.1
3.3 3.3 1.9 0.1
2.6 2.6 1.8 0.1
0.4 0.3 30.3 8.7 1.4 0.1 0.8
0.5 0.4 8.4 4.9 1.5 0.3 2.5
1.1 1.0 3.5 3.6 2.1 0.9 4.2
1.1 1.0 3.7 2.7 2.1 0.8 3.6
1.1 1.0 3.8 2.7 2.1 0.9 3.7
1.0 1.0 4.0 1.8 2.0 0.7 3.2
S‐T SOLVENCY OR LIQUIDITY RATIOS (x) Current ratio Quick ratio Cash ratio Net working capital to total assets L‐T SOLVENCY OR FINANCIAL LEVERAGE Total debt/Equity ratio Interest bearing debt/Equity ratio Interest coverage ratio Debt service coverage ratio Asset/Equity (Equity multiplier) Net debt/Equity Net debt/EBITDA
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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 return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of 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.
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