Ratchaburi Electricity Generating Holding

Outshine peers from existing projects and new investment plan BUY

Ratchaburi Electricity Generating Holding Plc (RATCH)

Move on with investment expansions both local and overseas

According to the analyst meeting yesterday, RATCH is still aiming to expand its

investments continuously both locally and internationally. For domestic business

expansions, they are mainly investments in ongoing projects in which RATCH is already

holding stakes such as Hongsa Power, Xe-Pian Xe-Namnoy Power, as well as SPPs and

VSPPs for which RATCH is chosen to be the constructor. At the same time, the company

will also invest in new projects both in forms of joint venture and M&A (6-7 projects

under a feasibility study now). Moreover, RATCH is preparing for a new round of IPP

auction, of which the winner will be announced in mid-2013. RATCH is one of

entrepreneurs that have readiness to join this round of auction, in terms of its location

from the old lands in Ratchaburi and Pathumthani and new lands in the East as well as

its expertise in a power plant business, making it have higher potential above peers. For

international expansions, Australia is still a major target of RATCH, especially an

alternative energy business which is supported by the Australian government. RATCH

has proposed 2 power plant projects with total capacity of 350 MW to the government,

which are believed to get the license by the end of 2013 and thus create value added for

the company in the long run. For a worry about a shortage of power supply in April

2013, the company confirms that the problem will not take place. Despite a maintenance

shutdown of RATCH's major natural gas pipeline Yadana - Yetagun in Burma, the

company has planned to run the power plant using fuel oil and diesel instead, while the

EGAT has also ordered other power plants to operate at a full capacity, so there is

nothing to worry.

4Q12's profit falls 57%qoq as projected. Growth foreseen again in 1Q13

4Q12's net profit was reported at B862m, decreasing 57%qoq close to our projection

due to following factors. 1) Availability payment (AP) of the main power plant has

decreased 5.1%qoq on seasonal effect while there was a planned maintenance shutdown

of RG (major overhaul) for 1 month. 2) Share of profit from RATCH's investment in

subsidiaries, TECO (RATCH holds 50percent stake) and RPCL (RATCH holds 25percent stake) has

plunged by 95.5%qoq because availability payment has decreased due to the seasonal

effect. Moreover, TECO and RPCL have recognized lower Fx gain qoq. Overall, FY2012's

net profit stood at B7.73bn, growing 59.6%yoy. For the outlook in 1Q13, we project the

profit in 1Q13 to revert to growth from 4Q12 because all power plants of RATCH will be

able to resume their full operations and there is also not a major overhaul like in 4Q12.

Considering norm profit outlook in 2013, the growth of 13%yoy is still foreseen because

in this year the company will recognize income from a 15.28 MW Solarta solar power

plant which has commenced a commercial run since 3Q12 and Huay Bong 3 and 2 wind

turbine power plants (with a capacity of 20.7 MW each) which have started the

commercial runs in 4Q12 and 1Q13, respectively, for a full year.

Buy. Additional upside can be expected if RATCH wins IPP auction

2013's fair value, DCF, is B61.90/share. We still confirm our BUY recommendation

although the upside is quite limited now. It is because there is still possible upside from

the new round of IPP auction. If RATCH wins an auction for 1 power plant with capacity

of 900 MW, it will increase fair value of the stock by B9/share or around 15percent from the

current value. Dividend yield in 2H12 has been announced at B1.17/share (as expected)

or an interim dividend yield of 1.94%.