RATCH - A yield play for risk-off market (TP Bt62.00, OUTPERFORM)
(12/12/2018 - 09:30)
กลุ่มอุตสาหกรรม พลังงานและสาธารณูปโภค
หุ้น RATCH
มูลค่าพื้นฐาน 62.00
คำแนะนำ BUY
  • Delaying COD for 410MW Xe-Pian Xe-Namnoy plant to 4Q19 (from 1Q19); limited impact on FY19F EPS
  • Secured 48MW Asahan-1 hydropower project in Indonesia which could add Bt100-120m profit per year to RATCH
  • Maintain OUTPERFORM, SoTP-based TP of Bt62; stock is trading at 11x FY19F PE, at a discount to peers’ average of 19x


Delaying COD for Xe-Pian Xe-Namnoy hydropower plant to 4Q19

The management said the delay at 410MW hydropower plant (RATCH holds 25% stake) was due to a leak in the saddle dam. The operator has submitted rectification details and infrastructure safety plan to the Laos’ government for approval, likely in 1Q19. Construction would take six months to complete and the dam needs three months to accumulate water in rainy season (3Q19). Hence, we expect COD in 4Q19. RATCH is waiting for the Laos government to find causes to the leak before booking a provision. The plant is covered by three insurance policies: (i) US$50m third party liability, (ii) US$680m construction risk with US$1m excess, and (iii) US$180m for delay in COD (excluding first 120 days).


Acquired 48MW hydropower project in Indonesia

Last week, RATCH announced it acquired 26.6% stake in 180MW Asahan-1 run-of-river hydropower project in North Sumatra, Indonesia. The plant has been in operation since Jan 2011 under a 30-year PPA ending Dec 2040. Total acquisition cost was Bt2.7bn, or Bt56m CAPEX per MW. This is reasonable compared to Bt60-70m investment cost for other similar-scale hydropower projects. We have limited details on tariff structure but our preliminary valuation for Asahan-1 is Bt0.7-1.0/sh based on (i) 10-12% EIRR, (ii) estimated tariff of Bt1.7/kWh vs Bt1.8-1.9/kWh for NN2HP (615MW hydropower in Laos), and (ii) 47.9MW equity capacity based on 26.6% stake. This project could add Bt100-120m profit per year to RATCH.


OUTPERFORM, Bt62/sh TP; decent dividend yield at 4.7-5.0%

We fine-tuned FY18-20F earnings by -4% to 1% after adjusting for delayed COD for Xe-Pian Xe-Namnoy hydropower plant and including contribution from 48MW Asahan-1. Valuation is undemanding at 11x FY19F PE (vs peers’ average of 19x) and the stock offers 4.7-5.0% dividend yield for FY18-20F. We recommend RATCH for long-term investors who seek dividend yields rather than capital gains.