KGI Securities has given an “Outperform” rating on Gulf Energy Development Public Company Limited (GULF) with a target price at ฿39.50/share as plenty of opportunities for investment in Vietnam.
KGI stated that GULFs management elaborated on the company’s key short-term focus into five aspects: i) gas to power plants (through competitive bidding and direct negotiation), ii) renewable energy (mostly existing wind farms in Vietnam and Europe through acquisition), iii) LNG businesses (wrapping up LNG shipper license for Hin Kong Power and SPPs), management expects to start importing LNG for existing SPPs in 2021, iv) hydro power plants in Laos (3 plants, 2.4GW) are under tariff MOU negotiation followed by PPA negotiation, and iv) infrastructure (LCP Phase 3 and Motorway O&M) that are expected to sign contracts by end of this year or early 1Q21.
Management mentioned that there are many opportunities to expand in Vietnam not only renewable (wind) but also conventional. GULF targets to acquire 200-300MW of wind in Vietnam (50-100MW per site). There are green field offshore wind farm opportunities under feasibility study stage and waiting PDP VIII approval.
Meanwhile, Ca Na LNG to power (1,500MWx4) would roll out Request for Proposal (1st phase 1,500MW) next year. The remaining three phases would require the approval of new PDP VIII. GULF is also exploring acquisition of another wind farm in Europe.
Previously, KGI foresaw 10% upside to core earnings this year. However, there will be a consultancy cost (success fee of legal and financial advisors etc.) after closing the deal which decreases overall consolidation performance. In general the fourth and first quarters would be the peak season for wind energy projects.
Thus, KGI maintained a rating of Outperform with a 2021 target price of Bt39.50 based on DCF. KGI preferred GULF as a super growth stock in the next ten years. There is plenty of room for additional growth (Bt70-80bn for debt financing which implies 2,600MWe assuming US$1.2mn/MW) to reach the threshold.