The share price of CH. Karnchang Public Company Limited (SET: CK) rose 2% to THB 14.50 per share at the closing of the morning session on Friday following the sales of its shareholding in Luang Prabang Power Company Limited to TTW Public Company Limited (SET: TTW).
According to Kasikorn Securities’ estimations and company inquiries, the sale is expected to be a fair deal, potentially resulting in only a minor gain or loss from the transaction. Currently, CK holds a 20% stake in Luang Prabang Power Company Limited (LPCL) and will reduce its share to 10%. The impact on CK includes:
1) CK will receive 2.8 billion baht, which will be used to pay off debts, reducing interest expenses by approximately 140 million baht per year.
2) CK will no longer report a share of loss from this project, commonly amounting to 100 million baht annually, due to intercompany eliminations needed as CK is both a contractor and shareholder.
3) CK’s financial statements will not fluctuate from FX gain or loss.
The impact on TTW includes an increase in debt by 2.8 billion baht, resulting in a 105 million baht increase in interest expenses per year.
Opinion:
- Kasikorn Securities holds a positive view on CK and a neutral view on TTW. CK will benefit from no longer being pressured by share of loss, stable financial statements free from FX gain or loss fluctuations, and reduced interest expenses.
- Should CK utilize the entire 2.8 billion baht from the investment sale to repay debt, its interest expenses will decrease by 140 million baht annually. Additionally, CK will not have to recognize a 100 million baht share of loss every year, leading to an 18% upside on the 2025 core profit estimates and affecting the target price by an additional 0.1 baht per share (0.5% of the target price at 20.60 baht).
