GULF: Short Term Negative Sentiments from Capital Increase

Thai Equity - Bottom-up - Equities, Pi Securities PCL, Thailand

Pi Research

Thai Equity - Bottom-up - Equities

Leading, full-service investment firm in Thailand

Pi Securities PCL, Thailand

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Equity Bottom-Up

Gulf Energy Development  / Equity Bottom-Up

We initiate coverage of GULF with a BUY rating, based on a 2021E target price of Bt44.6, derived from a sum-of-the-parts (SOTP) methodology. Our valuation implies 1.8x PEG for 2021E, lower than its World peers’ 2.1x PEG.The story:.<ul>
<li>Steady EPS growth at 20% CAGR in 2020-24E, outperforming sector peers</li>
<li>Upside from overseas power-generation business expansion</li>
<li>New S curve from gas &amp; infrastructure business</li>
<li>Topline growth outlook justifies valuation</li>
</ul>Risks: <ul>
<li>New project delays and cost overruns</li>
<li>Foreign exchange rate fluctuations </li>
</ul>Background: GULF is a holding company with a portfolio of electricity, steam, chilled water and other businesses. Currently, GULF engages in electricity generation and sales with various national regulatory bodies and industrial users, both domestically and internationally, with a total 2.7 GWe (5.9GW gross) in operation. GULF’s power projects are spread over the IPP (50%), SPP (46%) and renewable (4%) segments and are of various types/sizes. Ninety-six percent of GULF’s operating projects are in Thailand with the remainder in Vietnam. The company’s other business interests include infrastructure projects in Thailand and natural gas trading businesses both domestically and abroad.

We initiate coverage of GULF with a BUY rating, based on a 2021E target price of Bt44.6, derived from a sum-of-the-parts (SOTP) methodology. Our valuation implies 1.8x PEG for 2021E, lower than its World peers’ 2.1x PEG.The story:.
Steady EPS growth at 20% CAGR in 2020-24E, outperforming sector peers
Upside from overseas power-generation business expansion
New S curve from gas &amp; infrastructure business
Topline growth outlook justifies valuation
Risks: 
New project delays and cost overruns
Foreign exchange rate fluctuations 
Background: GULF is a holding company with a portfolio of electricity, steam, chilled water and other businesses. Currently, GULF engages in electricity generation and sales with various national regulatory bodies and industrial users, both domestically and internationally, with a total 2.7 GWe (5.9GW gross) in operation. GULF’s power projects are spread over the IPP (50%), SPP (46%) and renewable (4%) segments and are of various types/sizes. Ninety-six percent of GULF’s operating projects are in Thailand with the remainder in Vietnam. The company’s other business interests include infrastructure projects in Thailand and natural gas trading businesses both domestically and abroad.

GULF: Fastest Growing Utility Player in Thailand