edl generation€¦ · reuters / bloomberg edl.bk/edl ls paid‐up shares (m) 1,679.30 par (usd,...

REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 14

EDL‐Generation

Buy (16E TP LAK9,816/US$1.20) Close LAK5,900 / US$0.73

April 4, 2016 Bad 2015 behind it; good years ahead Price Performance (%)

‐20%

0%

20%

40%

60%

80%

100%

120%

Jan‐11

Jul‐11

Jan‐12

Jul‐12

Feb‐13

Aug‐13

Feb‐14

Aug‐14

Feb‐15

Aug‐15

Mar‐16

LSX EDL‐Gen

Source: Bloomberg, KT ZMICO Research

FY16 FY17

Consensus EPS (Kip) 464.13 571.88

KT ZMICO vs. consensus 0.0 0.0

Share data

Reuters / Bloomberg EDL.BK/EDL LS

Paid‐up Shares (m) 1,679.30

Par (USD, Kip) 0.49 / 4,000

Market cap (Kip bn/USDmn) 9,823.9 /1,210.36

Foreign limit / actual (%) 25.00 / 13.8326

52 week High / Low (Kip) 7,950 / 5,500

Avg. daily T/O (shares 000) 83.284

Estimated free float (%) 11.1674

Beta 0.80

URL www.edlgen.com.la

Note:

BCEL‐KT Securities is the underwriter of EDL‐Gen.

BCEL‐KT Securities Co., Ltd. is a joint venture

company between BCEL Bank and KT ZMICO

Securities (Thailand).

KT ZMICO is a selling agent of EDL‐Gen’s capital increase totaling 453.09mn shares through right offering and public offering with the subscription period during 28 Aug. 2015 – 8 Sept. 2015.

Patcharin Karsemarnuntana

Analyst, no 17834

[email protected]

66 (0) 2695‐5837

Lower earnings estimates; but still on an uptrend

Despite our downward earnings revision done on EDL‐Gen in 2016‐19E on the more conservative call on power generation from the existing projects and new project kickoffs, we maintain our view calling for its earnings prospects to be on an uptrend during the period (~17% CAGR for NP). Given that the weak 2015 earnings are largely priced in with its market price currently trading at 1.1x 2016E PBV (‐0.5SD) and 0.13x 2016E PBV/ROE (vs. regional peers of 0.17x), we reaffirm our Buy rating with the newly‐revised 2016E SOTP‐based TP of 9,816 kip/share.

Weak 4Q15 earnings; 2015 NP not as good as the past two wet years

EDL‐Gen reported weak 4Q15 NP of 108,119mn kip (–47% YoY and ‐61% QoQ) and core profit of 107,925mn kip (‐52% YoY and ‐62% QoQ), with the smaller profit contribution from both HPPs and IPPs as the main reason for the weakness. Its 2015 earnings were quite bad with low 640,839mn kip NP (‐29% YoY) and 650,814mn kip core profit (‐30% YoY), falling short of our forecasts by 24% and 23%, respectively. This was largely blamed on delayed rainfall and less water inflow, particularly in 3Q15, causing a shortfall of generation volume, especially in the case of IPPs, compared to the past two wet years in 2013‐14. It also announced a 2H15 DPS of 150 kip/share, bringing the full‐year DPS to 260 kip/share.

Downward earnings revision; earnings prospects still on the uptrend

Given the more conservative call on the company’s power generation, we slash our 2016‐19E NP forecasts by 18‐25%, to reflect 1) the big cut in equity power generation at its IPPs, including the Theun Hinboun project and the Houay Ho project; 2) a slight fine‐tuning of the consolidated power generation at its HPPs; and 3) the conservative call on the start of the contribution of new power assets, about 4‐12 months behind our earlier estimates. Our newly‐revised forecasts call for its 2016‐19E NP growth to be on an uptrend at 17% CAGR. We also cut our 2016E SOTP‐based TP to 9,816 kip/share (‐15% from earlier).

New power asset acquisitions in the pipeline

The ability of EDL‐Gen to meet its capacity expansion target of 1,762MW by 2019E (vs. 899MW in 2015) is dependent upon new power assets acquired and transferred from EDL. The group of new major assets to kick off their contribution in 2016E includes three projects, i.e., Nam Sana, Houay Lamphanh Gnai and Nam Khan 2, with the other projects to be consecutively kicked off in the years to come.

Financials and Valuation

FY Ended 31 Dec 2014 2015 2016E 2017E 2018E Sales (Kipmn) 839,193 847,759 1,315,325 1,586,553 1,947,247 Net profit (Kipmn) 907,684 640,839 779,411 960,359 1,086,545 EPS (Kip) ‐weighted 740.36 456.44 464.13 571.88 647.02 EPS (Kip) ‐ FD 740.23 381.61 464.13 571.88 647.02 EPS growth – FD (%) (6.6) (48.4) 21.6 23.2 13.1 DPS (Kip) 450 260 278 343 388 BV (Kip) 5,155 5,421 5,607 5,836 6,095

FY Ended 31 Dec 2014 2015 2016E 2017E 2018EPER (x) 8.0 15.5 12.7 10.3 9.1 EV/EBITDA (x) 7.1 11.5 10.1 8.7 8.4 PBV (x) 1.1 1.1 1.1 1.0 1.0 Dividend yield (%) 7.6 4.4 4.7 5.8 6.6 ROE (%) 14.7 8.3 8.4 10.0 10.8 Net gearing (%) 14.6 13.8 48.7 57.6 78.9

Company Update

Earnings upgrade/Earnings downgrade/Overview unchanged


Continuing weak 4Q15 earnings

EDL‐Gen reported 4Q15 NP of 108,119mn kip (–47% YoY and ‐61% QoQ) and core profit

of 107,925mn kip (‐52% YoY and ‐62% QoQ), with a smaller profit contribution from both

HPPs and IPPs as the main reason for the weakness.

Its 4Q15 core profit was 80% derived from its seven wholly‐owned hydropower plants

(HPPs) at the extent of 85,067mn kip (+12% YoY, ‐47% QoQ ) given sustained high

depreciation expenses and seasonally‐high administrative expenses; the remainder was

from its IPPs, amounting to 22,858mn kip (‐85% YoY, ‐81% QoQ), largely weighed down

by the Theun Hinboun project following its sustained low power generation and the forex

impact linked to the kip against the baht and USD.

Its HPPs delivered 524GWh power generation in 4Q15 (+18% YoY, but ‐27% QoQ), thanks

to the resumption of aggregate water inflow during Sept‐Dec 2015 with the total water

inflow 25% higher than the same period last year. This boosted their generation volume

in the quarter, particularly YoY, led by plants in the central region.

Meanwhile, its five IPPs (including Theun Hinboun, Nam Ngum 2, Huoay Ho, Nam Ngum 5

and Nam Lik 1‐2) posted equity power generation of 591GWh in the quarter (‐12% YoY,

+7% QoQ), with the main Theun Hinboun project showing sustained low power

generation; however, the Nam Ngum 2 project largely resumed its power generation in

accordance with the higher water inflow plus the use of its Primary Energy Account (PE

Account) on top in 4Q15.

Figure 1: EDL‐Gen’s 4Q15 and 2015 earnings review

unit: mnkip 4Q14 3Q15 4Q15 % YoY % QoQ 2014 2015 % YoY

Electricity sales 186,079 303,607 222,655 19.7 (26.7) 839,193 847,759 1.0

Cost of sales (59,965) (80,896) (67,407) 12.4 (16.7) (225,285) (269,374) 19.6

Gross profit 126,114 222,711 155,248 23.1 (30.3) 613,908 578,385 (5.8)

Profit from associates and JV 149,273 119,153 22,858 (84.7) (80.8) 474,467 286,218 (39.7)

Other income 1,076 3,175 1,587 47.5 (50.0) 5,680 16,198 185.2

Currency exchange gains (19,613) (6,856) 194 (101.0) (102.8) (18,098) (9,975) (44.9)

Total revenue 316,815 419,079 247,294 (21.9) (41.0) 1,301,242 1,140,200 (12.4)

Gain before expenses 256,850 338,183 179,887 (30.0) (46.8) 1,075,957 870,826 (19.1)

Administrative expenses (46,478) (30,030) (38,042) (18.2) 26.7 (123,528) (121,027) (2.0)

Profit before financial costs and tax 210,372 308,153 141,845 (32.6) (54.0) 952,429 749,799 (21.3)

Finance costs (11,474) (16,754) (16,870) 47.0 0.7 (31,722) (61,937) 95.2

Income tax (2,702) (17,244) (9,787) 262.2 (43.2) (22,695) (39,954) 76.0

Net profit 205,868 274,155 108,119 (47.5) (60.6) 907,684 640,839 (29.4)

Core profit 225,481 281,011 107,925 (52.1) (61.6) 925,782 650,814 (29.7)

EPS (weighted) 168.0 185.6 59.92 (64.3) (67.7) 740.36 456.44 (38.3)

Gross profit margin (%)* 67.8 73.4 69.7 75.2 70.3

EBITDA margin (%) 83.3 90.1 81.8 87.9 84.9

Net profit margin (%) 65.0 65.4 43.7 69.8 56.2

ROE (%) 13.2 14.4 4.8 14.7 8.3

Interest‐bearing debt/equity (x) 0.34 0.28 0.27 0.34 0.27 Note: *gross profit margin = gross profit from operation / electricity sales Source: KT ZMICO Research


2015 earnings – not as good as the past two wet years

EDL‐Gen delivered 2015 NP of 640,839mn kip (‐29% YoY) and core profit of 650,814mn

kip (‐30% YoY), falling short of our forecasts by 24% and 23%, respectively. This was

largely blamed on the delayed rainfall and less water inflow, particularly in 3Q15, which

resulted in the quarter not showing peak power generation as previously, leading to a

shortfall of generation volume, particularly in the case of IPPs, compared to the past two

wet years in 2013‐14.

At the company’s core profit level, the contribution was more than 56% shared by its

HPPs (~364,596mn kips, ‐19% YoY) and 44% by its IPPs (~286,218mn kips; big drop 40%

YoY), with the smaller power generation as the main weakness.

Its HPPs marked power generation of 1,995GWh in 2015, on par with volume generation

in 2014. Meanwhile, its IPPs delivered smaller equity power generation of 2,237GWh in

2015 (including generation from Primary Energy and Secondary Energy), down 17% YoY,

and also dropping by 17% YoY if including the use of the PE Account at its Nam Ngum 2

project. Among its IPPs, we saw a substantial drop in the volume contribution from the

Theun Hinboun project (largely due to less water inflow) and the Houay Ho project (due

to delayed rainfall with lower power declaration in Nov‐Dec‐2015 to secure water level

for power generation in 2016). At the same time, the Nam Ngum 2 project had a

moderate decrease in sales of power generation, with a volume cushion from the

resumed power generation in 4Q15, and the use of the PE Account in the same quarter

(94GWh on 100% basis in 4Q15 vs. 102GWh in 4Q14).

Its gross profit margin was squeezed to 70.3% in 2015 (vs. 75.2% in 2014); meanwhile, Its

EBITDA margin slightly decreased but remained solid at 84.9% in 2015 (vs. 87.9% in 2014)

given higher depreciation expenses from a major overhaul with the replacement of more

than one‐year‐useful life machinery parts being capitalized as the assets and amortized in

line with their useful life.

Its debt‐to‐equity was 0.27 times ended Dec. 2015, thanks to no consolidation of new

power assets in the year. Note that only one IPP project, namely Nam Ngum 5 (equity

capacity 18MW), was completely transferred to the company’s power portfolio in Feb.

2015.

It also announced a 2H15 DPS of 150 kip/share, bringing the full‐year DPS to 260

kip/share. This implies a dividend payout ratio of 57% and a dividend yield of 4.4% for

full‐year 2015. It will go XD on 18 Apr., 2016 and the payment date will be on 6 May,

2016.


Figure 2: EDL‐Gen’s power generation of its wholly‐owned projects and its IPPs

A) Power generation of its seven 100%‐owned hydropower projects in 2014‐15

B) Power generation of its IPPs in 2014‐15

Source: Company, KT ZMICO Research Source: Company, CKP, KT ZMICO Research

Note: Power generation of those IPPs shown are on equity basis, with the Nam Ngum 2’s power generation including PE, SE, Excess Energy, except the use of PE Account

Figure 3: EDL‐Gen profitability ratio and gearing

A) EDL‐Gen’s quarterly gross profit margin and EBITDA margin

B) EDL‐Gen’s quarterly debt‐to‐equity ratio

Source: Company, KT ZMICO Research

Source: Company, KT ZMICO Research


HPPs ‐ resumption of water inflow seen in late 3Q15

The aggregate 2015 water inflow to its HPPs was 14% lower than 2014, with the higher

inflow in the last four months (during Sept – Dec 2015) unable to make up for the shortfall

in the early months. Note that HPPs in the south including Xeset 1, Xeset 2 and Selabam

suffered from less inflow than last year while HPPs in the central region, including Nam

Ngum 1, Nam Leuk, Nam Mang 3 and Nam Song, gained more inflow during the period.

Given the well‐diversified plant locations, its aggregate power generation across the HPPs

amounted to 1,995GWh in 2015, quite on par with 1996GWh in 2014. This solid figure

demonstrates the operational risk mitigation in its power portfolio, with higher water

inflow and power generation of plants in central Laos (including Nam Ngum 1, Nam Leuk,

Nam Mang 3 and Nam Song) helping to offset the lower water inflow and power

generation shortfall in the south (including Xeset 1, Xeset 2 and Selabam).

Nam Ngum 2 – showing a secured water level

Among its IPPs, we only have a track record for Nam Ngum 2’s monthly water inflow (EDL‐

Gen holding 25% stake), which shows a resumption of water inflow since Aug. 2015 and a

secured water level back to 370m. asl (meters above sea level) from Sep. 2015 until now.

This was quite in line with the development of its power generation, which bounced back

to 617GWh in 4Q15 (including PE, SE; on a 100% basis), vs. the low 439GWh in 3Q15. Its

full‐year power generation from PE and SE reached 2,099GWh in 2015 (on a 100% basis),

dropping moderately by 5% YoY, mostly weighed down by the poor contribution in 3Q15;

meanwhile, Its full‐year sales of power generation also marked a 6% YoY drop to

2,193GWh in 2015 despite the use of the PE account totaling 94GWh in the last quarter.

Figure 4: Development of water inflow/water level and power generation at its HPPs and IPP

A) Monthly water inflow and power generation at its seven HPPs

B) Monthly water level and power generation at Nam Ngum 2

Source: The Company, KT ZMICO Research Source: CKP, KT ZMICO Research

Note: Power generation of Nam Ngum 2 shown on 100% basis


Downward earnings revision in 2016‐19E

Given the more conservative call on the company’s power generation on both a medium

and long‐term basis due to risk on seasonal rainfall (like the case in 2015), we slash our

2016‐19E NP forecasts by 18‐25%, to reflect 1) the big cut in equity power generation at

its IPPs, including the Theun Hinboun project by 20‐22% to 1,530‐1,577GWh in 2016‐19E

(equivalent to 2,550‐2,628 GWh on a 100% basis), as well as the Houay Ho project by 8%

to 78GWh in 2016‐19E (equivalent to 392GWh on a 100% basis – the minimum level

specified in Power Purchase Agreement); 2) the slight fine‐tuning of the consolidated

power generation at its HPPs by ‐1% to ‐2% to 1,916‐1,925GWh in 2016‐19E; and 3) the

conservative call on the beginning of the contribution of new power assets under both

“To‐do list” projects and “Wish‐list” projects, which are approximately 4‐12 months

behind our earlier estimates following the time consuming process of asset transfer from

Electricite Du Laos (EDL) to EDL‐Gen. This results in consolidated power generation being

slashed by 13‐24% to 5,1118GWh / 6,250GWh / 6,975GWh / 7,324GWh in 2016‐19E,

respectively. Note that our newly‐revised 2016E forecasts calling for 5,118GWh of

consolidated sales of power is quite close to the company’s new guidance of 5,184GWh.

Given the combination of the downward earnings revision and the exclusion of equity

value in the Nam Phoun project (self‐developed JV project) given that the feasibility study

is being reviewed with its installed capacity subject to change to avoid environmental

impact, we also cut our 2016E SOTP‐based TP to 9,816 kip/share (‐15% from earlier).

Earnings prospects on the uptrend

Our newly‐revised forecasts call for the company’s 2016‐19E NP growth at 17% CAGR,

given larger power generation driven by the successive new power asset acquisitions from

both “To‐do list” projects and “Wish‐list” projects. Meanwhile, the slower EPS growth at

12% CAGR in 2016‐19E is due to the dilution effect from its capital increase in late 3Q15.

The company’s earnings will be driven by new power asset acquisitions through “To‐do

list” projects with 374MW equity capacity, facilitated by debentures issuance, and “Wish‐

list” projects with 489MW equity capacity (excluding the Nam Phoun project), financed by

a capital increase. The company’s power capacity is targeted to rise to 1,762MW by 2019E

(vs. 899MW in 2015, including Nam Ngum 5’s 18MW equity capacity having been

transferred since Feb‐2015), implying 18% CAGR during 2016‐19E. Given the assumption

that the contribution of new power asset acquisitions will be largely felt in 2016‐17E, its

earnings enlargement will occur in the same pattern with projected NP growth at

22%/23%, respectively.


Figure 5: Downward revision on EDL‐Gen’s power generation and its projected effective equity capacity

A) EDL‐Gen’s projected power generation at its seven HPPs – new & old

B) EDL‐Gen’s equity power generation at itsfive IPPs – new & old

C) EDL‐Gen’s consolidated power generation

– new & old D) EDL‐Gen’s assumed effective capacity (based

on each project’s month contribution) and increase in MW capacity – new & old

Source: KT ZMICO Research Source: KT ZMICO Research

Note: *effective capacity calculated based on the projected month contribution of each new project


Figure 6: Downward revision on EDL‐Gen’s earnings projections

A) EDL‐Gen’s core profit and NP – new vs. old B) EDL‐Gen’s newly earnings projection and % growth


Figure 7: Summary of EDL‐Gen’s 2016E TP valuation

Source: KT ZMICO Research

Figure 8: EDL‐Gen PBV band

Source: KT ZMICO Research, Bloomberg


Figure 9: EDL‐Gen’s valuation comparison with regional hydropower operators

Source: KT ZMICO Research, Bloomberg Note: *pure hydropower operators

Development of new power asset acquisition in the pipeline

The ability of EDL‐Gen to meet its capacity expansion target of 1,762MW by 2019E is

dependent upon new power assets acquired and transferred from EDL (vs. 899MW in

2015, counting only the projects whose contributions have already kicked off).

It will take time for the many stages of the asset transfer process for both 100%‐owned

projects (starting with Asset Transfer MOU, then Asset Transfer Agreements, Power

Purchase Agreement, and Concession Agreement at the final stage), and IPPs (starting

with Share Transfer MOU, then Share Transfer Agreement, Shareholder Agreements and

finally Issuance of Share Certificates). According to the company’s disclosure, the group of

new assets including the three major projects under “To‐do list” projects, namely Nam

Sana (equity capacity: 14MW), Houay Lamphanh Gnai (equity capacity: 88MW) and Nam

Khan 2 (equity capacity: 130MW), completed their asset transfers on 24 Dec. 2015, and

have completed tariff negotiations with EDL. Thus, we expect these three new projects to

definitely make their first contribution in 2016E onward (our estimates assume a 9‐month

contribution in a year for each). Meanwhile, the other projects are planned to be

consecutively transferred with our conservative call for their first contribution to start

with a 6‐12 month lag behind the targeted COD year for the Greenfield projects and the

acquired year for operating projects.

Given all “To‐do list” and “Wish‐list” projects having MOUs signed for asset purchases

and transfer between EDL and EDL‐Gen, the only risk is a possible slip in their first

contributions given the time consuming process of asset transfer.

NAME Mkt Cap PER (x) P/BV (x) Yield (%) ROE (%) EV/EBITDA (x) PBV/ROE (x) (US$Mn) 16E 17E 16E 17E 16E 17E 16E 17E 16E 17E 16E 17E

VERBUND AG 4,484 18.4 20.4 0.8 0.8 2.4 2.2 4.4 3.5 9.9 10.7 0.18 0.23 AUSTRIA 18.4 20.4 0.8 0.8 2.4 2.2 4.4 3.5 9.9 10.7 0.18 0.23

BROOKFIELD RENEWABLE* 4,313 51.0 36.3 1.4 1.5 5.9 6.2 3.9 4.1 10.3 9.7 0.36 0.38

CANADA 51.0 36.3 1.4 1.5 5.9 6.2 3.9 4.1 10.3 9.7 0.36 0.38

TRACTEBEL ENERGIA SA 6,669 13.2 11.9 3.4 3.3 5.2 7.6 25.3 26.6 7.0 6.2 0.13 0.12

AES TIETE SA‐PREF* n.a. n.a. n.a. n.a. n.a. n.a. n.a. 36.2 46.9 n.a. n.a. n.a. n.a.

BRAZIL 13.2 11.9 3.4 3.3 5.2 7.6 30.8 36.7 7.0 6.2 0.13 0.12

INNERGEX RENEWABLE* 1,126 76.3 29.8 n.a. n.a. 4.5 4.7 n.a. n.a. 18.7 12.6 n.a. n.a.

ALTERRA POWER CORP 158 9.6 8.4 0.8 0.7 n.a. n.a. 9.0 11.0 10.8 9.4 0.09 0.07

CANADA 43.0 19.1 0.8 0.7 4.5 4.7 9.0 11.0 14.8 11.0 0.09 0.07

CHINA YANGTZE POWER* 31,855 16.0 15.2 2.0 2.0 4.1 4.1 13.9 12.7 8.6 8.2 0.15 0.15

CHINA 16.0 15.2 2.0 2.0 4.1 4.1 13.9 12.7 8.6 8.2 0.15 0.15

NHPC LTD* 4,021 10.5 10.0 0.8 0.8 4.3 4.1 7.9 7.9 8.3 7.9 0.10 0.10

JAIPRAKASH POWER* 222 71.4 24.0 0.2 0.2 0.0 0.0 0.3 (0.3) 10.4 8.4 0.89 (0.81)

INDIA 41.0 17.0 0.5 0.5 2.2 2.1 4.1 3.8 9.3 8.2 0.10 0.10

RUSHYDRO JSC* 3,898 5.9 5.4 0.4 0.4 3.5 3.5 5.8 6.1 4.6 4.4 0.07 0.07

RUSSIA 5.9 5.4 0.4 0.4 3.5 3.5 5.8 6.1 4.6 4.4 0.07 0.07

CK POWER PCL 474 35.5 34.2 0.9 0.9 1.1 1.2 2.6 2.7 9.3 9.0 0.35 0.34

THAILAND 35.5 34.2 0.9 0.9 1.1 1.2 2.6 2.7 9.3 9.0 0.35 0.34

EDL‐GENERATION PCL* 1,221 12.7 10.3 1.1 1.0 4.7 5.8 8.4 10.0 10.1 8.7 0.13 0.10

LAOS 12.7 10.3 1.1 1.0 4.7 5.8 8.4 10.0 10.1 8.7 0.13 0.10

AVERAGE 23.2 16.7 1.3 1.2 3.7 4.1 9.2 10.1 9.3 8.4 0.17 0.17


Meanwhile, further capacity expansion beyond projects in the pipeline is on the upside,

with the majority of potential expansion being hydroelectric power plants, in which the

company has high expertise, and with the first footprint in solar power plants to follow.

Figure 10: New power capacity

A) EDL‐Gen’s nameplate capacity and effective equity capacity

B) EDL‐Gen’s breakdown of effective equity capacity between 100%‐owned and IPPs


Project Installed capacity (MW) Assumed stake holding Xeset 2 expansion 10 100% Selabam expansion 8 100% Lower Houay Lamphan 9 60% Nam Kalabai 1, 2, &3 31 80% Nam Theun 1 97.5 15% Solar power plant 19.2 60%

Source: The company


Figure 11: EDL‐Gen’s projects in the pipeline Project Name Location Stake Installed Equity Target Remarks

MW MW Market Target COD/ % Project Progress

“To‐do list” projects

Nam Sana Vientiane 100% 14 14 Laos Operating asset

Houay Lamphan Ngai Xekong 100% 88 88 Laos COD late2015/99.36%*

Nam Khan 2 Luangprabang 100% 130 130 Laos COD 2016E/100%*

Nam Khan 3 Luangprabang 100% 60 60 Laos COD mid‐2016E/95.15%**

Subtotal 100% owned 292 292

Nam Ngum5^ Vientiane 15% 120 18 Laos In operation/contribution kickoff

Nam Long Luangnamtha 20% 5 1 Laos Operating asset

Nam Ou2 Luangprabang 15% 120 18 Laos COD 2017E/89.35%*

Nam Ou5 Phongsaly 15% 240 36 Laos COD 2017E/98%*

Nam Ou6 Phongsaly 15% 180 27 Laos COD 2017E/90%*

Subtotal IPPs 665 100

Sum – “To‐do list” projects 957 392

“Wish list” projects

Nam Chiean 1 Xiengkhouang 100% 104 104 Laos COD 2018E/70.96%**

Nam Hinboun Khammouane 100% 30 30 Laos COD late 1Q17E/67.31%**

Xeset 3 Champasak 100% 23 23 Laos COD mid‐2016E/84.42%**Nam Ngum 1 Ext DFE Vientiane 100% 80 80 Laos COD 2018E/31%**

Nam Ngum 1 Ext Unit6 Vientiane 100% 40 40 Laos

COD 2019E/in the process of bidding

on electrical/mechanical equipment

installation

Subtotal 100% owned 277 277

Nam Ngiep2 Xiengkhouang 10% 180 18 Laos COD 2016E/100%*

Nam Beng Oudomxay 20% 34 6.8 Laos COD mid‐2016E/100%*

Xekaman3 Sekong 15% 250 37.5 Laos/Vietnam COD 2016/100%*

Nam Lik1 Vientiane 10% 60 6.0 Laos COD 2017E/29%*

Nam Mang1 Xaysomboun 10% 64 6.4 Laos COD 2017E/80%*

Nam Tha1 Bokeo 20% 168 33.6 Laos COD 2018E/13%*

Subtotal IPPs 756 108.3

Sum – “Wish list” projects 1,033 385.3

Direct‐investment project

Nam Bi Sekong 80% 130 104 Laos na

Subtotal Direct Investment 130 104

Total 2,120 881.3

Note: ^The 15%‐stake share transfer in the Nam Ngum5 project from EDL was completed in Feb‐2015 and its contribution already kicked off in the year.

*project progress as of Oct. 2015

**project progress as of mid‐Mar. 2016


Financial tables

Financial Summary

unit: mn kip 2014 2015 2016E 2017E 2018E 2019E

Consolidated Income Statement

Electricity sales 839,193 847,759 1,315,325 1,586,553 1,947,247 2,049,279

Cost of sales (225,285) (269,374) (397,561) (495,085) (606,888) (639,789)

Gross profit 613,908 578,385 917,764 1,091,467 1,340,359 1,409,490

Profit from associates and JV 474,467 286,218 318,592 438,905 471,164 541,599

Other income 5,680 16,198 11,223 10,223 10,223 10,223

Currency exchange gains (18,098) (9,975) (351) 0 0 0

Total revenue 1,301,242 1,140,200 1,644,790 2,035,681 2,428,634 2,601,102

Gain before expenses 1,075,957 870,826 1,247,229 1,540,595 1,821,746 1,961,312

Administrative expenses (123,528) (121,027) (146,911) (173,636) (208,023) (220,573)

Profit before financial costs and tax 952,429 749,799 1,100,318 1,366,959 1,613,723 1,740,739

Finance costs (31,722) (61,937) (260,713) (339,575) (449,716) (460,872)

Income tax (22,695) (39,954) (60,193) (67,025) (77,462) (81,922)

Net profit 907,684 640,839 779,411 960,359 1,086,545 1,197,946

Core profit 925,782 650,814 779,762 960,359 1,086,545 1,197,946

EPS (weighted) 740.36 456.44 464.13 571.88 647.02 713.36

EPS (FD) 740.23 381.61 464.13 571.88 647.02 713.36

Consolidated Balance Sheets

Cash and cash equivalents 1,251,534 1,213,770 2,638,272 2,966,717 2,663,208 3,141,689

Current assets 1,785,554 1,618,628 3,459,945 3,949,352 3,755,155 4,287,381

Property, plant and equipment‐Net 4,145,851 4,342,731 10,922,405 11,640,169 14,140,102 14,065,848

Investment in Joint ventures and interests in 2,108,966 2,268,922 2,538,477 3,137,797 3,450,523 3,912,074

Non‐current assets 780,890 3,738,091 8,351 8,768 9,207 9,667

Total assets 8,821,261 11,968,372 16,929,178 18,736,087 21,354,987 22,274,970

Current liabilities 413,390 409,127 409,023 1,138,468 877,289 1,404,159

Long term loans 2,075,125 2,293,620 7,104,162 7,797,482 10,242,944 10,156,879

Non‐current liabilities 11,105 161,397 0 0 0 0

Total liabilities 2,499,620 2,864,144 7,513,185 8,935,951 11,120,233 11,561,037

Paid up capital 4,904,867 6,717,215 6,717,215 6,717,215 6,717,215 6,717,215

Retained earnings 978,811 1,042,217 1,353,981 1,750,933 2,137,415 2,567,953

Total equities 6,321,641 9,104,228 9,415,992 9,800,136 10,234,754 10,713,933

Cash flow

Net earnings 907,684 640,839 779,411 960,359 1,086,545 1,197,946

DD&A 181,555 225,442 338,452 428,070 526,255 556,096

Unrealize FX Gain (Loss) 18,098 9,975 351 0 0 0

Change in working capital 203,145 46,411 (354,569) (134,770) (44,152) (34,582)

Capex (316,297) (422,322) (6,918,126) (1,145,835) (3,026,188) (481,842)

Investments in affiliates (37,901) (109,840) (150,375) (409,539) (107,146) (213,627)

Free cash flows 452,197 (2,616,812) (2,694,297) (491,912) (1,770,704) 775,607

Debt Financing 1,219,248 287,008 4,747,842 1,396,574 2,119,121 421,643

Dividend paid (551,798) (436,619) (467,647) (576,215) (651,927) (718,768)

Capital increase 0 2,655,740 0 0 0 0

Others 0 0 0 0 0 0

Net cash flows 1,119,647 (110,683) 1,585,899 328,446 (303,510) 478,482

Cash equivalents ‐beginning 159,914 1,251,534 1,213,770 2,638,272 2,966,717 2,663,208

Cash equivalents ‐ending 1,251,534 1,213,770 2,638,272 2,966,717 2,663,208 3,141,689


Financial Summary

2014 2015 2016E 2017E 2018E 2019E

Per share data and financial ratio EV ‐ fully diluted 6,652.8 6,649.0 8,628.2 9,264.3 10,706.9 10,673.1

EPS ‐ fully diluted 740.2 381.6 464.1 571.9 647.0 713.4

EPS ‐ weighted 740.4 456.4 464.1 571.9 647.0 713.4

DPS 450.0 260.0 278.5 343.1 388.2 428.0

BV 5,155.4 5,421.4 5,607.1 5,835.8 6,094.6 6,380.0

PER (x) 8.0 15.5 12.7 10.3 9.1 8.3

PBV (x) 1.1 1.1 1.1 1.0 1.0 0.9

EV/EBITDA (x) 7.1 11.5 10.1 8.7 8.4 7.8

Div. yield (%) 7.6 4.4 4.7 5.8 6.6 7.3

Div. payout ratio (%) 60.8 57.0 60.0 60.0 60.0 60.0

Percentage Growth (%)

Sales Growth (2.7) 1.0 55.2 20.6 22.7 5.2

Core Profit Growth (2.3) (29.7) 19.8 23.2 13.1 10.3

Net Profit Growth (6.6) (29.4) 21.6 23.2 13.1 10.3

EPS growth ‐ FD (%) (6.6) (48.4) 21.6 23.2 13.1 10.3

EBITDA Growth (4.5) (15.3) 48.6 24.8 19.2 7.3

Profitability Ratio (%)

Gross profit margin 75.2 70.3 71.4 70.4 70.3 70.2

EBIT margin 73.9 65.1 66.9 67.1 66.4 66.9

EBITDA margin 87.9 84.9 87.5 88.2 88.1 88.3

Net profit margin 69.8 56.2 47.4 47.2 44.7 46.1

ROE 14.7 8.3 8.4 10.0 10.8 11.4

ROA 11.4 6.2 5.4 5.4 5.4 5.5

ROCE 11.9 6.4 5.6 5.6 5.7 5.8

S‐T SOLVENCY OR LIQUIDITY RATIOS (x)

Current ratio 4.3 4.0 8.5 3.5 4.3 3.1

Quick ratio 4.3 3.9 8.4 3.5 4.3 3.0

Cash ratio 3.0 3.0 6.5 2.6 3.0 2.2

Net working capital to total assets 0.2 0.1 0.2 0.2 0.1 0.1

L‐T SOLVENCY OR FINANCIAL LEVERAGE

Total debt/Equity ratio 0.4 0.3 0.8 0.9 1.1 1.1

Interest bearing debt/Equity ratio 0.3 0.3 0.8 0.9 1.0 1.0

Interest coverage ratio 30.3 12.0 4.2 4.0 3.6 3.8

Debt service coverage ratio 8.7 4.0 3.9 2.6 2.5 1.7

Asset/Equity (Equity multiplier) 1.4 1.3 1.8 1.9 2.1 2.1

Net debt/Equity 0.1 0.1 0.5 0.6 0.8 0.7

Net debt/EBITDA 0.8 1.3 3.2 3.1 3.8 3.5


DISCLAIMER

This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.

KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS BUY: Expecting positive total returns of 15% or more over the next 12 months OUTPERFORM: Expecting total returns between ‐10% to +15%; returns expected to exceed market return over six months period because of specific catalysts UNDERPERFORM: Expecting total returns between ‐10% to +15%; returns expected to below market return over six months period because of specific catalysts SELL: Expecting negative total returns of 10% or more over the next 12 months

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.

KT•ZMICO Securities Company Limited 8th, 15th-17th, 19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500

Telephone: (66-2) 695-5000 Fax. (66-2) 631-1709

Phaholyothin Branch 3rd Floor, Shinnawatra Tower II,

1291/1 Phaholyothin Road,

Phayathai, Bangkok 10400

Telephone: (66-2) 686-1500

Fax. (66-2) 686-1666

Ploenchit Branch 8th Floor, Ton Son Tower,

900 Ploenchit Road, Lumpini,

Pathumwan, Bangkok 10330

Telephone: (66-2) 626-6000

Fax. (66-2) 626-6111

Sindhorn Branch 2nd Floor, Sindhorn Tower 1, 130-132

Wireless Road, Lumpini,

Pathumwan, Bangkok 10330

Telephone: (66-2) 627-3550

Fax. (66-2) 627-3582, 627-3600

Viphavadee Branch G Floor, Lao Peng Nguan 1 Bldg.,

333 Soi Cheypuand, Viphavadee-Rangsit Road,

Ladyao, Jatujak, Bangkok 10900

Telephone: (66-2) 618-8500

Fax. (66-2) 618-8569

Chachoengsao Branch 108/34-36 Mahajakkrapad Road,

T.Namuang, A.Muang,

Chachoengsao 24000

Telephone: (038) 813-088

Fax. (038) 813-099

Chonburi Branch 4th Floor, Forum Plaza Bldg.,

870/52 Sukhumvit Road, T. Bangplasoy,

A. Muang, Cholburi 20000

Telephone: (038) 287-635

Fax. (038) 287-637

Pattaya Branch 382/6-8 Moo 9, T. NongPrue,

A. Banglamung, Cholburi 20260

Telephone: (038) 362-420-9

Fax. (038) 362-430

Khon Kaen Branch 5th Floor, Charoen Thani Princess Hotel,

260 Srichan Road, T. Naimuang,

A. Muang, Khon Kaen 40000

Telephone: (043) 389-171-193

Fax. (043) 389-209

Sriworajak Building Branch1st – 2nd Floor, Sriworajak Building, 222

Luang Road, Pomprab,

Bankgok 10100

Telephone: (02) 689-3100

Fax. (02) 689-3199 Central World Branch

999/9 The Offices at Central World,

16th Fl., Rama 1 Rd, Pathumwan,

Bangkok 10330

Telephone: (66-2) 673-5000,

(66-2) 264-5888 Fax. (66-2) 264-5899

Chiang Mai Branch 422/49 Changklan Road, Changklan

Subdistrict, Amphoe Meuang,

Chiang Mai 50100

Telephone: (053) 270-072

Fax: (053) 272-618

Phuket Branch 22/61-63, Luang Por Wat Chalong Road,

Talat Yai, Mueang Phuket,

Phuket 83000

Tel. (076) 222-811,(076) 222-683

Fax. (076) 222-861

Pak Chong Branch 173 175, Mittapap Road,

Nong Sarai, Pak Chong,

Nakhon Ratchasima 30130

Tel. (044) 279-511

Fax. (044) 279-574

Hat Yai Branch 200/301 Juldis Hatyai Plaza Floor 3,

Niphat-Uthit 3 Rd,

Hatyai Songkhla 90110

Telephone: (074) 355-530-3

Fax: (074) 355-534

Phitsanulok Branch Krung Thai Bank, Singhawat Branch

114 Singhawat Road,

Muang, Phitsanulok 65000

Telephone: 083-490-2873

Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our

views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in

securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are

made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.

Bangkhae Branch 6th Floor The Mall Group Building Bangkhae

275 Moo 1 Petchkasem Road, North Bangkhae,

Bangkhae, Bangkok 10160

Tel. (66-2) 454-9979

Fax. (66-2) 454-9970

Nakhon Ratchasima Branch 624/9 Changphuek Road, .

Naimaung, A.Maung,

Nakhon Ratchasima 30000

Telephone: (044) 247222

Fax: (044) 247171

Cyber Branch @ North Nana Krung Thai Bank PCL, 2 Floor,

North Nana Branch

35 Sukhumvit Rd.,Klong Toey Nua

Subdistrict , Wattana District,

Bangkok 10110

Telephone: 083-490-2871

Nakhon Pathom Branch1156 Petchakasem Road,

Sanamchan Subdistrict,

Amphoe Meuang ,

Nakhon Pathom Province 73000

Telephone: (034) 271300

Fax: (034) 271300 #100

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