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BANPU

Fully valued. Downgrade to HOLD

Banpu Plc (BANPU)

- Hongsa…major driver since 2H15

Hongsa power plant (BANPU holds 40percent stake) with a total capacity of 1,800

MW will start running its first phase commercially in June 2014, the second

phase in November 2015, and the third phase in March 2016. This is a

major project to boost BANPU's profit since 2H15 onward. The coal business

is still facing an oversupply problem from Indonesia and Australia, but the

coal price would revive in 2H14 from growing demands.

- 2H14 to weaken from 1H14

BANPU's 2Q14 net profit was B682m, falling 63.2%qoq as projected

because extraordinary profit from a coal swap had dropped significantly.

Normalized profit decreased only 13.8%qoq to B685m, mainly from lower

average selling price of coal. Overall, 1H14 net profit makes up 65.3% of

FY2014 forecast. We maintain our full-year forecast, projecting the profit in

2H14 to weaken from 1H14 due to a continued decrease in average coal

price and declining profit from BLCP in 4Q14 on seasonal effect. Yet, the

profit growth of 20.6%yoy and 33.6%yoy is foreseen in 2014 and 2015,

respectively.

- Downgrade to HOLD

We derive 2014 fair value (DCF) at B32/share. The share price has surged

aggressively from news in the market until it got close to the fair value,

while we are likely to cut the coal selling price assumption in 2015 for the

current price is low. In the short term, we downgrade our recommendation.

Fully valued. Downgrade to HOLD


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