KGI Securities noted in its report that the market is undervaluing the growth prospects of NewCo, highlighting that GULF’s current share price primarily reflects immediate benefits like operational streamlining, a stronger balance sheet with reduced net IBD/E ratio, and enhanced borrowing capacity.
While concerns around lower ROE and a shift away from the power sector linger, The analyst foresees a promising medium-term trajectory driven by its leadership in renewable energy, forays into ICT, LNG liquefaction, and strategic cost-cutting measures.
NewCo’s distinct ability to yield superior returns on investments, in contrast to the debt-heavy norm in the power industry worldwide, is a standout feature. Backed by a solid track record and robust partnerships, NewCo is well-positioned for success in power sector ventures.
Remaining steadfast in its outlook for NewCo, KGI anticipates a 12-14% upswing in profits compared to its current projections. This growth is attributed to NewCo’s heightened stake in Advanced Info Service (ADVANC) to 40% (up from 19%), leading to an extra Bt3 billion in profit and Bt6 billion in yearly free cash flow.
The equity base is forecasted to surge by a minimum of 110%, reaching Bt310 billion, driven significantly by the fair valuations of Intouch Holdings (INTUCH) and ADVANC. NewCo’s profit composition is expected to be generated with 80% from power generation and 20% from ICT.
As a result, KGI Securities maintains an ‘Outperform’ rating for GULF, setting a target price of Bt70.00 per share and designating the stock as its preferred choice through the first quarter of 2025.
The recent dip in GULF’s share price is viewed by the analyst as an opportunity for investors, backed by anticipated upgrades and market confidence growth, positioning GULF for an outperformance against the SET Index.
