Surge in electricity demand set
to boost utilities' bottom line
Bangkok Post, May 8, 2003
7.5% rise a windfall to Egco and Banpu
Reuters
A surge in electricity demand, powered by consumer-led economic growth, may bolster quarterly earnings of the country's utilities companies when they report in the coming week. Both Electricity Generating Plc (Egco) and Banpu Plc, which owns two power plants in addition to core coal business, will benefit from a 7.5% year-on year jump in electricity demand in the first quarter.
Egco is most analysts' top pick for the sector because soaring power demand is likely to translate directly into a slight gain in net profit from the 1.25 billion baht the company posted in the first quarter last year.
Banpu will record steady revenues from its coal business, which supplies power plants, but see total earnings drop around 30% because of lost revenue from selling its port business and paying more royalties on its Indonesian coal mines.
Neither company will come anywhere near the 121% jump in first-quarter earnings posted by by Ratchaburi Electricity Generating Holding Plc last month due to the addition of three new power plants. But analysts say a 30% jump in the share price of Ratchaburi, the country's biggest private power producer, in the last four months meant the stock was fully valued.
Egco's growth this year is seen in line with growth in electricity demand, as the firm expanded its capacity by only 4.5% in the last year.
"There should not be anything surprising in Egco's first-quarter earnings, but numbers might be a little bit better because electricity demand and prices are up," an analyst at a Thai brokerage said.
Egco's shares have risen 22.8% already this year. But analysts say Thailand's second-largest power producer still has more upside because the state-owned Electricity Generating Authority of Thailand plans to raise its stake in the company to 30% from 25.43% by buying shares in the open market.
UBS Warburg has a "buy" on Egco with a price target of 55 baht, compared with yesterday's closing price of 46 baht.
Although domestic consumption is also helping Banpu's coal sales to power plants, the company could see its first quarter earnings drop by about 30% from 545 million baht a year ago. This is largely because Banpu booked a gain of 228 million baht in the first quarter last year from the port business sale.
"Their coal business is about the same, but year-on-year their net profit will probably dip because of the non-core business they sold," said Pornsuk Amornvadekul, an analyst at Ayudhya Securities.
Both coal prices and Banpu's sales have increased since last year, but analysts said margins were narrowing because of bigger royalty fees in Indonesia, where Banpu owns six mines.
Sicco Securities analyst Kantapon Vimolpairoj, who has a "buy" on Banpu with a two-month target of 57 baht, said Banpu's normalised profit for the first quarter should edge up to 113 million baht from 104 million a year ago. The company's shares slipped 50 satang yesterday to 39 baht.
Unrealised capital gains from Banpu's stake in the petrochemicals company Aromatics Plc would help make up for some lost revenue. Back to Newsclippings | To top
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