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ELECTRICITY GENERATING
EGCOMP <Bt39.75>
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Recommendation
New
: HOLD
Previous : HOLD
Fair Value : Bt59
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Maintenance
costs pull down 4Q02 earnings
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Electricity Generating
(EGCOMP) recorded 2002 earnings of Bt2,958mn, up 1% yoy but
well below expectations. This was due to the company booking
its share of the losses from subsidiary companies mainly
from development cost of Bt125mn from Nam Theun 2 project
(NTPC).
Also, the company's
operational costs rose 22% yoy as a result of higher
maintenance expenses mainly from Amata Power Bangprakong
(APB). Moreover, EGCOMP recorded an impairment provision of
Bt342mn on Gulf Electric, whose coal-fired power plant at Bo
Nok has been delayed two years as a result of local
opposition.
|
EGCOMP income statement |
|
Income Statement (Mn Bt) |
4Q02 |
3Q02 |
QOQ |
4Q01 |
YOY |
FY01 |
FY02 |
% |
|
Sales |
2,709 |
2,862 |
(5%) |
2,513 |
8% |
10,732 |
11,463 |
7% |
|
COGs |
1,537 |
1,123 |
37% |
1,117 |
38% |
4,033 |
4,926 |
22% |
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Gross profits |
1,173 |
1,739 |
(33%) |
1,396 |
(16%) |
6,699 |
6,536 |
(2%) |
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Gross margin (%) |
43% |
61% |
N.A. |
56% |
N.A. |
62% |
57% |
N.A. |
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SG&A |
297 |
178 |
67% |
301 |
(1%) |
889 |
900 |
1% |
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EBITDA |
1,592 |
2,248 |
(29%) |
1,847 |
(14%) |
8,853 |
8,486 |
(4%) |
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EBITDA margin (%) |
59% |
79% |
N.A. |
74% |
N.A. |
82% |
74% |
N.A. |
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Interest expense |
696 |
713 |
(2%) |
741 |
(6%) |
3,299 |
2,807 |
(15%) |
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Net profit before extra item |
140 |
929 |
(85%) |
552 |
(75%) |
3,175 |
3,126 |
(2%) |
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Extra ordinary gain (loss) |
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- Forex gain (loss) |
16 |
(399 ) |
N.A. |
25 |
(37%) |
(236 ) |
174 |
N.A. |
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- Other (loss) |
0 |
0 |
N.A. |
0 |
N.A. |
0 |
(342 ) |
N.A. |
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Net profit |
156 |
531 |
(71%) |
577 |
(73%) |
2,939 |
2,958 |
1% |
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EPS (Bt) before extra item |
0.27 |
1.77 |
(85%) |
1.05 |
(75%) |
6.04 |
5.94 |
(2%) |
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EPS (Bt) |
0.30 |
1.01 |
(71%) |
1.10 |
(73%) |
5.59 |
5.63 |
1% |
EGCOMP‘s revenues increased
7% yoy mainly due to contributions from KEGCO, Gulf Electric
(GEC), Conal and APB. KEGCO's revenues rose Bt621mn while
REGCO's revenues were down Bt295mn due to the cost plus
basis used to compute its availability payment (AP) paid by
the Electricity Generating Authority of Thailand (EGAT). In
the formula, EGAT adjusts the AP by an exchange rate factor
to compensate for foreign loan exposure.
Revenue contributions from
associated companies (GEC, Conal and APB) jumped 19% yoy to
Bt2,139mn mainly from first year contribution of APB. Gross
margins fell from 62% to 57% as a result of higher
maintenance costs. We expect margin would improve this year
as maintenance costs fall back to normal levels.
|
Peak demand and energy generation (2001-2003) |
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Peak demand (MW) |
Energy generation (GWH) |
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Month |
2001 |
% |
2002 |
% |
2003 |
% |
2001 |
% |
2002 |
% |
2003 |
% |
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Jan |
14,212 |
4.34 |
14,553 |
2.40 |
15,778 |
8.42 |
8,124 |
5.42 |
8,260 |
1.67 |
8,991 |
8.85 |
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Feb |
14,601 |
3.51 |
15,261 |
4.52 |
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7,927 |
7.16 |
8,184 |
3.25 |
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Mar |
15,013 |
2.36 |
16,485 |
9.81 |
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8,927 |
3.45 |
9,687 |
8.50 |
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Apr |
16,126 |
8.1 |
16,681 |
3.44 |
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8,937 |
12.25 |
9,393 |
5.10 |
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May |
15,188 |
3.48 |
16,293 |
7.28 |
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9,054 |
3.57 |
9,678 |
6.89 |
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Jun |
14,992 |
5.17 |
16,157 |
7.77 |
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8,876 |
5.41 |
9,515 |
7.20 |
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Jul |
15,045 |
6.4 |
16,030 |
6.54 |
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9,003 |
6.62 |
9,754 |
8.34 |
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Aug |
15,097 |
5.02 |
15,912 |
5.40 |
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9,057 |
6.08 |
9,621 |
6.22 |
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Sep |
15,247 |
6.98 |
15,818 |
3.74 |
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8,872 |
6.58 |
9,335 |
5.21 |
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Oct |
14,865 |
5.13 |
15,992 |
7.59 |
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8,847 |
4.79 |
9,574 |
8.23 |
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Nov |
14,605 |
3.33 |
16,074 |
10.06 |
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8,070 |
3.24 |
9,175 |
13.69 |
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Dec |
14,708 |
4.13 |
15,930 |
8.31 |
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8,083 |
1.57 |
9,152 |
13.23 |
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Source : EGAT |
EGCOMP's long-term outlook is
still positive given rising peak electricity demand, which
rose 8.4% yoy in January. This could imply that electricity
demand will grow faster than the current 6% growth forecast.
This could result in future electricity projects being moved
back forward, such as EGCOMP's 50%-owned IPP, Gulf Power.
This year, EGCOMP will also
receive the first revenue contributions from TLP Cogen and
Roy Ed Green in January and April, respectively.
A near-term new project is
KEGCO's 300MW capacity expansion with an investment of about
$0.35mn/MW or Bt4,500mn. Financing for this project will be
through short-term loans from financial institution. The
management expects to conclude the project within the end of
2Q03.
The company generates very
strong cash flow of Bt6,155mn or Bt11.70/share representing
a very cheap P/CF of 3.4x. As a result, we expect the
company could pay another 2H02 dividend of at least Bt1,
which represents an annualised dividend yield of 5.6%. Even
though the current share price is still undervalued trading
on a 2003 PER of 6.1x and EV/EBITDA of 4.6x, we are
maintaining our HOLD recommendation until we see
stronger earnings contributions from the new acquisitions.
|
Financial ratios |
2000 |
2001 |
2002 |
2003F |
2004F |
2005F |
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Sales (Bt mn) |
9,697 |
10,732 |
11,463 |
11,559 |
11,656 |
11,755 |
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EBITDA (Bt mn) |
7,953 |
8,853 |
8,486 |
8,768 |
8,842 |
8,917 |
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EBITDA margin (%) |
82.0 |
82.5 |
74.0 |
75.9 |
75.9 |
75.9 |
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Net profit (Bt mn) |
1,217 |
2,939 |
2,958 |
3,405 |
3,625 |
3,836 |
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EPS (Bt) |
2.3 |
5.6 |
5.6 |
6.5 |
6.9 |
7.3 |
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PER (x) |
17.1 |
7.1 |
7.0 |
6.1 |
5.8 |
5.5 |
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EV/EBITDA (x) |
5.7 |
5.0 |
5.2 |
4.6 |
4.2 |
3.7 |
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Gearing (x) |
1.1 |
1.5 |
1.2 |
1.1 |
0.9 |
0.6 |
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ROA (%) |
2% |
5% |
5% |
6% |
7% |
8% |
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ROE (%) |
7% |
17% |
15% |
16% |
16% |
15% |
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Dividend (Bt) |
2.0 |
2.3 |
2.3 |
2.5 |
2.6 |
2.8 |
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Dividend yield (%) |
5.0% |
5.7% |
5.7% |
6.3% |
6.5% |
6.9% |
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