Electricity Generating PCL

Plug in value of SBPL project We maintain our Outperform rating on EGCO and raise our 2015 fair value to Bt182.75 from Bt175.00 after factoring in value from its 49%-owned subsidiary San Buenaventura Power Ltd (SBPL), a coal-fired power plant in the Philippines. Our TP adjustment follows announcement that the projects Power Supply Agreement (PSA) with MERALCO was approved by the Energy Regulatory Commission of the Philippines on Wednesday. Meanwhile, even though we do not foresee the outlook for BLCPs earnings in 2Q15 recovering yet, following another unplanned shutdown, we maintain our view that its full-year performance will not be hurt given that BLCP needs to achieve its Contract Availability Hour (CAH).

Investment highlights Additional value from SBPL: On 20 May 2015, the Energy Regulatory

Commission of the Philippines approved a Power Supply Agreement (PSA) with a long-term period of 20 years between San Buenaventura Power (SBPL), a coal-fired power plant in the Philippines, and the Manila Electric Company (MERALCO). Note that the contract is extendable for a further 5 years. The total contracted capacity is 455MW and all electrical output will be purchased by MERALCO. The project, which is located in Mauban, Quezon province, is scheduled to start operations in the first quarter of 2019. Based on the PSA approval and EGCOs stake of 49% in the project, we see SBPL boosting EGCOs 2015 fair value by Bt7.75/share.

Another unplanned shutdown at BLCP in 2Q15: According to management guidance, BLCP had to shut down for 22 days in May 2015 to allow for the repair of a tube leak at Unit 2. As a result, we expect the earnings contribution from BLCP in 2Q15 to be at much the same level seen in 1Q15. However, BLCP will need to generate electricity at full capacity until the end of the year without any stoppages to achieve its Contract Availability Hour (CAH). Consequently, we maintain our full-year forecast for BLCP with profit in terms of YoY comparisons falling in the 1H15, while improving in the 2H15.

New investment project: EGCO is currently carrying out a resource survey for a 60MW geothermal project after concluding that its SEG project has the potential to be expanded by another 1 unit. If the resource capacity is confirmed, management expects the new project should be able to start operations in 2019. Based on EGCOs holding of 20% in the SEG project and our assumptions of an investment cost of USD1mn/MW, cost of debt of 6.0% and project life of 30 years, the incremental value of the project to EGCO should be around Bt1.0/share.

Valuation Our new fair price rises to Bt182.75 from Bt175.00 after we incorporate SBPLs

value, based on a DCF methodology, and applying a WACC of 5.9% and capital structure at 75:25. EGCO is trading at 9.4x-9.8x PER, making it the cheapest stock in terms of simple PER among its peers, while offering an attractive 19.8% upside to our 2015 fair price.

EGCO TB Outperform Fair price Bt182.75 Close Price (21/05/2015) Bt 152.50 Upside/Downside % 19.8 Valuation DCF Sector Energy & Utilities Market Cap Btm 80,286 30-day avg turnover Btm 76 No. of shares on issue m 526 CG Scoring (2014) Excellent

Investment fundamentals

EGCO TB rel SET performance

Source: SET Smart (all figures in THB unless noted)

Analyst (s) Jakapong Chawengsri Jakapong.c@kasikornsecurities.com

Voranart Meethavorn (Assistant Analyst) Voranart.m@kasikornsecurities.com

22 May 2015 Kasikorn Securities Public Company Limited

Year end Dec 31 2014 2015E 2016E 2017ECompany Financials

Revenues (Bt m) 17,201 16,740 23,629 33,661

Core net profit (Bt m) 7,523 8,210 8,549 8,876

Net profit (Bt m) 7,667 8,210 8,549 8,876

Net EPS (Bt) 14.56 15.60 16.24 16.86

DPS (Bt) 6.50 6.50 6.75 6.75

BV/shr (Bt) 140.98 146.25 153.51 161.48

Net EPS growth (%) 10.89 7.09 4.13 3.82

ROA (%) 4.77 4.96 4.51 4.38ROE (%) 10.33 10.66 10.58 10.44Net D/E (x) 1.17 1.15 1.35 1.38

ValuationPE (x) 11.50 9.78 9.39 9.05

PBV (x) 1.19 1.04 0.99 0.94

EV/EBITDA (x) 18.56 16.15 15.74 14.89

Dividend yield (%) 3.88 4.26 4.43 4.43

020406080100120140

0

50

100

150

200

May-14 Aug-14 Nov-14 Feb-15 May-15

THB EGCO TB [LHS] Rel SET [RHS]

22 May 2015 2 Electricity Generating PCL

Fig 1 EGCOs portfolio

Source: EGCO and KS

Fig 2 EGCO's expansion plan

Source: EGCO and KS

Power plants Fuel used Location COD/SCOD EGCO portionContracted

capacityEffective capacity

Operating projectDomesticKEGCO Natural Gas Nakorn Sri Thammarat 19 Jun 96 100.0% 748.2 748.2GEC-GPG (KK2) Natural Gas Saraburi 5 May 07&1 Mar 08 50.0% 1,468.0 734.0BLCP Coal Rayong 1 Oct 06&1 Feb 07 50.0% 1,346.5 673.3EGCO COGEN Natural Gas Rayong 28 Jan 03 80.0% 112.2 89.7ROI-ET GREEN Rice Husk Roi-Et 29 May 03 70.3% 8.8 6.2GEC-GCC Natural Gas Saraburi 3 Sep 98 50.0% 108.6 54.3GEC-NKCC Natural Gas Saraburi 12 Oct 00 50.0% 121.3 60.7GEC-SCC Natural Gas Samutprakarn 23 Aug 99 50.0% 114.5 57.2GEC-GYG Parawood Yala 28 Nov 06 50.0% 20.2 10.1NED Solar Lopburi 22 Dec 11 66.0% 63.0 41.6SPP2 Solar Saraburi 2 May 12 100.0% 8.0 8.0SPP3 Solar Srisaket 21 Feb 12 100.0% 8.0 8.0SPP4 Solar Srisaket/Ubon-Ratchatani 24 Jan 12 100.0% 6.0 6.0SPP5 Solar Roi-Et 22 Jun 12 100.0% 8.0 8.0GPS (Phase 1, 2, 3, 4) Solar Nakhon Sawan/Chai Nat/Petchaboon 1,2/5 Mar 12 & 1 Feb 13 60.0% 26.0 15.6TWF Wind Chaiyaphum Jul 2013 90.0% 6.9 6.2Solarco Solar Nakornpathom/Suphanburi Dec 2013 49.0% 57.0 27.9GIDEC Waste Songkla Dec 2014 50.0% 6.5 3.3OverseaNTPC (NT2) Hydro Laos PDR 30 Apr 10 35.0% 1,023.0 358.1QPL Coal Quezon, Philippines 30 May 00 98.0% 460.0 450.8MPPCL Coal Luzon, Philippines Unit 1 - Jun 98&Unit 2 - Dec 98 41.0% 589.0 241.2SEG Geo Thermal West Java, Indonesia Unit 1- Jun 00&Unit 2 - Mar 09 20.0% 227.0 45.4BRWF Wind New South Wales, Australia 1 Nov 14 100.0% 113.0 113.0

Total operating project capacity 3,767Future projectDomesticKN4 Natural Gas Nakorn Sri Thammarat 20 Jun 16 100.0% 930.0 930.0TP Cogen Natural Gas Ratchaburi Oct 2017 100.0% 113.0 113.0SK Cogen Natural Gas Ratchaburi Oct 2017 100.0% 107.0 107.0TJ Cogen Natural Gas Pathumthani Jun 2017 100.0% 106.0 106.0CWF Wind Chaiyaphum Dec 2016 90.0% 90.0 81.0OverseaSBPL Coal Quezon, Philippines 1Q19 49.0% 455.0 223.0XPCL Hydro Laos PDR Oct 2019 12.5% 1,280.0 160.0

Total future project capacity 1,720

2015 2016 2017 2018 2019 2020

CWF(Wind)

KN4(Gas)

TP Cogen(Wind)

SK Cogen(Wind)

TJ Cogen(Wind)

XPCL(Hydro)

SBPL(Coal)

Under construction project

Under development project

22 May 2015 3 Electricity Generating PCL

Source: EGCO and KS

Year-end 31 Dec

Income Statement (Btmn) 2013A 2014A 2015E 2016E 2017E Cashflow (Btmn) 2013A 2014A 2015E 2016E 2017E

Revenue 18,686 17,201 16,740 23,629 33,661 Net profit 6,914 7,667 8,210 8,549 8,876

Cost of sales and services -12,060 -10,310 -10,734 -15,968 -24,548 Depreciation & amortization 3,387 2,134 3,932 4,888 4,917

Gross Profit 6,627 6,891 6,006 7,661 9,113 Change in working capital -6,355 -13,117 2,397 -1,622 -2,128

SG&A -2,865 -2,956 -2,514 -3,644 -4,413 Others -5,945 -5,176 -6,139 -6,267 -6,248

Other income 67 70 126 92 33 CF from operation activities -1,999 -8,493 8,400 5,548 5,417

EBIT 4,744 5,788 5,358 5,924 7,271 Capital expenditure -5,965 -10,881 -8,455 -18,679 -10,847

EBITDA 8,131 7,922 9,290 10,812 12,189 Investment in subs and affiliates 474 -115 -15 -820 -1,155

Interest expense -2,824 -2,794 -2,668 -3,074 -4,030 Others -457 -7,718 756 -3,183 -1,518

Equity earnings 6,252 5,461 6,265 6,401 6,458 CF from investing activities -5,948 -18,714 -7,714 -22,682 -13,520

EBT 8,305 8,599 8,954 9,251 9,699 Cash dividends -3,258 -3,310 -3,353 -3,484 -3,554

Income tax -1,218 -792 -619 -568 -613 Net proceeds from debt 5,058 25,255 3,166 19,063 7,101

NPAT 7,087 7,807 8,336 8,683 9,085 Capital raising 0 0 0 0 0

Minority Interest -173 -140 -125 -134 -210 Others 1,435 -411 125 134 210

Core Profit 6,780 7,523 8,210 8,549 8,876 CF from financing activities 3,235 21,535 -61 15,713 3,756

Extraordinary items 0 0 0 0 0 Net change in cash -4,712 -5,672 625 -1,421 -4,347

FX gain (loss) 133 144 0 0 0 Key Statistics & Ratio

Reported net profit 6,914 7,667 8,210 8,549 8,876 Per share (Bt)

Balance Sheet (Btmn) Reported EPS 13.13 14.56 15.60 16.24 16.86

Cash & equivalents 7,921 8,653 8,758 7,661 3,469 Core EPS 12.88 14.29 15.60 16.24 16.86

Accounts receivable 4,375 2,534 1,674 2,599 4,039 DPS 6.00 6.50 6.50 6.75 6.75

Inventories 0 0 0 0 0 BV 133.4 141.0 146.2 153.5 161.5

Total current assets 24,038 23,328 21,562 22,866 21,945 EV 231 279 285 323 345

Investment in subs & others 3,887 3,369 11,240 14,099 15,462 Free Cash Flow -3.80 -16.13 15.96 10.54 10.29

Fixed assets-net 44,521 55,275 63,730 82,409 93,256 Valutaion analysis

Total assets 131,120 160,687 165,566 189,613 202,690 Reported P/E (X) 9.33 11.50 9.78 9.39 9.05

Short-term debt 1,800 10,048 0 0 0 Core P/E (X) 9.51 11.72 9.78 9.39 9.05

Accounts payable 1,231 782 837 1,181 1,683 P/BV (X) 0.92 1.19 1.04 0.99 0.94

Total current liabilities 10,788 18,734 5,972 6,723 5,909 EV / EBITDA (X) 14.95 18.56 16.15 15.74 14.89

Long-term debt 42,238 59,686 74,931 93,994 103,082 Price / Cahflow (X) -32.26 -10.38 9.56 14.47 14.82

Total liabilities 60,868 86,468 88,572 108,798 117,674 Dividend yield (%) 4.90 3.88 4.26 4.43 4.43

Paid up capital 5,265 5,265 5,265 5,265 5,265 Profitability ratio

Share premium 8,601 8,601 8,601 8,601 8,601 Gross margin (%) 35.46 40.06 35.88 32.42 27.07

Retained earnings 53,107 57,484 62,274 67,269 72,591 EBITDA margin (%) 43.52 46.06 55.50 45.76 36.21

Minority interests 910 955 1,080 1,214 1,424 EBIT margin (%) 25.39 33.65 32.01 25.07 21.60

Total shareholders' equity 70,253 74,219 76,995 80,815 85,016 Net profit margin (%) 37.00 44.57 49.05 36.18 26.37

Total equity & liabilities 131,120 160,687 165,566 189,613 202,690 Core ROA (%) 5.17 4.68 4.96 4.51 4.38

Key Asumtpions Core ROE (%) 9.65 10.14 10.66 10.58 10.44

No. of outstanding shares (mn) 526 526 526 526 526 Liquidity ratio

Effective capacity (MW) 3,606 3,767 3,767 3,950 4,358 Current ratio (X) 2.23 1.25 3.61 3.40 3.71

Capacity growth (%) -4.4 4.5 0.0 4.9 10.3 Quick ratio (X) 2.23 1.25 3.61 3.40 3.71

Leverage Ratio

D/E ratio (X) 0.87 1.17 1.15 1.35 1.38

Net debt/EBITDA (X) 5.08 8.42 7.51 8.32 8.31

Net debt/equity 0.59 0.90 0.91 1.11 1.19

Int. coverage ratio (X) 3.94 4.08 4.36 4.01 3.41

Growth

Revenue (%) 36.06 -7.95 -2.68 41.15 42.46

EBITDA (%) 54.95 -2.57 17.27 16.38 12.73

Reported net profit (%) -38.49 10.89 7.09 4.13 3.82

Reported EPS (%) -38.49 10.89 7.09 4.13 3.82

Core profit (%) 0.83 10.95 9.14 4.13 3.82

Core EPS (%) 0.83 10.95 9.14 4.13 3.82

22 May 2015 4 Electricity Generating PCL

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