Investors losing appetite for capital-hungry Thai energy producers

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Investors losing appetite for capital-hungry Thai energy producers

By The Nation

 

 

Investors are uncertain over the price of shares in energy producers after some launched moves to raise their capital, experts said.

 

The price of the six big power producers with market capitalisation over Bt50 billion – Gulf Energy Development (GULF), Global Power Synergy (GPSC), Energy Absolute (EA) Electricity Generating (EGCO), B Grimm Power (BGRIM) and Ratch Group (RATCH) – fell by an average 7.3 per cent last week before rebounding today (August 24).

 

Since the beginning of the year, share prices in the six firms have dropped an average of 16 per cent.

 

Sornchai Pitthayaprug, an analyst at Capital Nomura Securities, said the prices are dropping as investors question whether they are too high, especially after GULF announced moves to raise capital.

 

"In the previous year, the price of shares in power developers increased because investors believed they can generate consistent profit – until GULF announced it was increasing its capital," he said.

 

"This caused uncertainty among investors over whether other power plant companies will move to increase capital."

 

Investors are also worried about a possible decline in GPSCs’ third-quarter performance after it closed one power plant, as well as Thai Oil's move to sell GPSC shares to PTT, Sornchai added.

 

"The market is concerned over whether Thai Oil sold GPSC shares at a reasonable price at Bt67 book value per share," he said.

 

There is also uncertainty over the weakening baht, which the securities company predicts will fall to Bt32 per dollar within two weeks.

 

"However, we believe that investors won’t mind this factor, although the baht will weaken in the third quarter of this year," he said.

 

"Normally, power plant stocks have an unrealised loss from currency exchange but this does not affect the companies' cash flow. For example, companies faced currency exchange loss during the first quarter of this year, but they gained profit from currency exchange in the second quarter as the baht strengthened."

 

He expected the performance of power plant companies to improve in the second half of 2020 on the first half and on the equivalent period last year.

 

"GULF, EGCO, BGRIM and RATCH will gain positive sentiment from new power plants, reduced closures for maintenance, and high gross profit," he added.

 

"Considering the share value, we recommend investors buy RATCH and EGCO shares."

 

Meanwhile, Jaroonpan Wattanawong, an analyst at Maybank Kim Eng Securities (Thailand), said the price of power generation shares dropped significantly last week from mass sell-offs by institutional investors, as well as moves by GULF and BCPG to increase capital.

 

"BGPG will raise capital by granting a discount of 25 per cent and warrants to raise funds for investment in a wind power plant in Laos," he said.

 

"Experts said power plant companies are increasing their capital now because the economy is expected to worsen next year, resulting in negative sentiment on the stock market and difficulties in raising funds."

 

He added that if the situation worsens, institutional investors with large stockholdings in energy generators would sell these stocks first.

 

"Given energy generators’ price to earnings ratios, the price of power plant shares is very high," he added.

 

Source: https://www.nationthailand.com/business/30393447

 

-- © Copyright The Nation Thailand 2020-08-25

 

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[Burma Bill]

when I first read the headline, I thought of Red Bull!!

[Leaver]

On 8/25/2020 at 4:40 PM, Burma Bill said:

when I first read the headline, I thought of Red Bull!!

When I first read the article, I just thought of "bull."   ????