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Utilities

3Q13A earnings recap: helped by lower FX loss. Lower FX loss helped support

utilities net profit to rise 39% QoQ, with more profit contribution from startups of new

plants and newly acquired assets behind the 36% YoY rise in core profit, especially for

GLOW and EGCO. Among these companies, EGCO outperformed peers with core profit

growth of 79% YoY after it acquired more shares in Quezon power plant in June 2012 as

well as in other renewable power plants.

4Q13F outlook: low season for power companies. 4Q13F earnings for power

generating companies is likely to weaken QoQ seasonally since most of the contracted

available hours (CAH) under PPAs for each year are usually completed by late

November to early December. This implies that their plants are idle for the remainder

of the year, time used for maintenance to take advantage of the lower demand for

electricity. At the same time, over time, the greater capacity of renewable power

plants added into portfolios, primarily solar and wind, will help lessen the usual QoQ

decline. Note that these two types of renewable power usually perform equally well in

the fourth quarter.

New PDP could be released in 1H14. Since the last revision of Thailand's Power

Development Plan (PDP) in June 2012, the market has been expecting the Ministry of

Energy to release the new version of PDP after a long delay. We believe the weakening

demand for electricity caused by slower economic activities and domestic politics is

behind the delay. According to an industry source, the new PDP could be published in

1H14, and is likely to include new coal-fired IPPs. However, demand growth for

electricity is decelerating and the authorities may have to find other rationale to

convince the public of the necessity of coal-fired power plants to diversify fuel sources.

Further, gaining public acceptance of coal-fired power plants in the face of

environmental concerns remains the key challenge.

TTW: 3Q13A beat on BoI tax privilege. 3Q13A net profit was Bt825mn, +32% YoY and

+58% QoQ. Growth QoQ came from the operational turnaround of CKP due to rising

production, lower interest expense and smaller FX loss. Tax expense was a negative

Bt10mn as the company used its tax privileges under the BoI's program for plant

improvement after the floods for May 27-September 30. It also booked a Bt113mn

gain from CKP: Bt3mn from the sale of 1mn shares and an accounting gain of Bt110mn

on change in value of investment.

TTW: 4Q13F weaker. Without the prior quarter's extraordinary gains and higher

taxes from three months of BoI tax privileges versus four months in 3Q13, earnings will

drop QoQ in 4Q13.

TTW remains top pick on dividend yield. Without near-term catalysts in the sector,

our stock pick focuses on dividend yield. On this count, we still prefer TTW with

expected dividend yield of ~6percent for the next three years vs. 3-4percent for power companies.

The company will also deliver an outperforming earnings growth in 2014F.


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