Maybank Securities has made an analysis after Energy Absolute Public Company Limited (EA) revealed its 1Q19 financial statement, giving a Trading-Buy recommendation with a target price at ฿57.75/share.
Maybank indicates that EA’s 1Q19 net profit was THB 1.2 billion, surged +57% QoQ, due to the new capacity of Hanuman wind farm that started operation 180MW of electricity during the quarter. Had Kanghan wind farm saw the wind recovering as the company expected. All power plants benefit from the rising Ft due to the price of electricity being tied to the Ft.
However, the profit shrank by -38% YoY due to the very high net profit base in the previous year as it recorded extra gain for Amitar that changed status from associated company to a subsidiary company after EA increased the stake in the previous year. Excluding this item, EA’s normalised profit was THB 1.1 billion, +48% QoQ and +10% YoY.
Furthermore, Maybank estimates that in 2Q19, EA’s normalised profit will set a new record. The last batch of wind farm with 80MW has already supplied electricity to the system on April 13, causing the total production capacity to increase +14% QoQ. In addition, Maybank found that the B100 oil price has started to slow down -7% QoQ from the previous quarter, down -17% QoQ. Therefore, overall performance is still very bright.
Earnings accounted for 18% of the estimate while new capacity was gradually realised. Maybank, therefore, maintains its earnings forecast for this year at THB 6.7 billion, +34% YoY, while other developments out of forecast are still positive. That includes the EV car project, with 4500 units booked. Revenue will be realised in 2020.
Recently, TRIS has adjusted EA ratings from A- to A, reflecting the company’s long-term stability and its lower financial costs in the future. Given its outstanding strength, Maybank, therefore, uses PEG 1.0x (formerly 0.90) as a multiplier during the next year. The target price is revised up by 11% to ฿57.75/share. Maintain “TRADING BUY” call.
However, Maybank has made a remark on the risks from fluctuations in electricity output than solar power plants of wind farms. Maybank’s projections do not include upside risk from PCM projects, batteries and electric boats that are under development this year.