ALERT
Thailand
Inter Far East Engineering
(IFEC.BK/IFEC TB)
A trip South to see new era for wind farms in Thailand
Outperform Maintained
Price as of 3 Apr 2015
13.50
12M target price (Bt/shr)
17.40
Unchanged / Revised up (down) (%)
N.A.
Upside/downside (%)
28.9
Key messages
Last week, we had the privilege to join the auspicious
main post ceremony for Pak Phanang wind farm.
IFEC’s pilot wind farm project in Southern Thailand.
The project will boost both investor and industry
confidence. The key highlight from our trip was the
strong support the local community and NGOs are
giving the project. We maintain our rating of
Outperform on the counter with a target price of
Bt17.40, our best case scenario target is Bt27.00.
The previous panic selling on the counter is a good
chance to accumulate at a lower cost.
Event
Last week, we visited IFEC’s first wind farm. It is located in Pak Phanang district, Nakhon
Si Thammarat province. The project is under construction and expected to COD in late
3Q15. We also visited the wind farm in Koh Yai district, Songkhla Province and talked
with an NGO leader.
Impact
Pak Phanang wind park, boosts investor confidence
The auspicious main post ceremony for the Pak Phanang wind farm project was held April
3. We have seen some of the wind turbines manufactured by Goldwind that will be used
in the project (Figure 3). The project is expected to COD in late 3Q15, delayed from
midyear, as management decided to adjust the install capacity to 10.4MW from 10.0MW
to maximize the power production yield.
Three wind farms with capacity of 270MW ready to start, waiting for PPA
Inter Far East Wind International (IWIND), IFEC’s subsidiary, already has completed the
feasibility study on another three sites, each with 90MW capacity. The company has LOI
for all three sites and is awaiting PPA, which is expected to be launched by midyear. A
key highlight from the trip was the strong support from the local community, which is a
key obstacle to other power plant projects. During our trip to Koh Yai district, Songkla
province, we had a chance to talk with a local NGO leader. He believes IWIND’s wind
farm could stimulate the local economy as it will be a new landmark for tourists to
Southern Thailand.
Valuation & Action
IFEC’s share price dropped 29% in March after reaching our base case scenario target
price. We believe this was from profit taking (IFEC’s share price has risen around 80%
since KGI initiated coverage on November 4, 2014) and investors fear selling pressure
from capital raising with right offering (RO) at a cost of Bt4.0, which began trading
during mid-March. Additionally, there were rumors on the street about IFEC’s projects
during the price fall. We believe investor confidence will grow if the first wind farm
project CODs in late 3Q15. We recommend to accumulate the counter and maintain a
rating of Outperform with a target price of Bt17.40, while our best case scenario target
price is Bt27.00 (Figure 13).
Risks
Delays to any of IFEC’s projects could cause a significant mismatch to our forecast
recognized revenue and changes in plans would affect our valuation.
Suchot Tirawannarat
66.2658.8888 Ext.8850
[email protected]
Assistant analyst
Poonpat Chaikumhan
66.2658.8888 Ext.8856
[email protected]
April 7, 2015
*The Company may be issuer of Derivative Warrants on these securities.
http://research.kgi.com; Bloomberg: KGIT <GO>
Please see back page for disclaimer
1
Thailand
Inter Far East Engineering
Figure 1: Wind farm at Pak Phanang district location
Source: https://maps.google.com; KGI Research
Pak Phanang wind park, a new era of wind farm in South
Figure 1 shows the location of the company’s wind farm in Pak Phanang district with
total area of ~200 rai and is located on the beach (Figure 2-5). We had the privilege to
join the auspicious main post ceremony for the project (Figure 6-9). The ceremony
implies the project is starting up. According to Dr. Sumet Suttapukti, IWIND’s
management, onshore wind farm projects normally take 6 months to construct and we
expect the project to COD in late 3Q15 or early 4Q15.
The management plans to design the wind farm to be a wind park, which will be a new
landmark for tourists to Southern Thailand. The park is designed by Rafa Plus Architect.
The hidden value for the project is the value of the land, if the project is a new landmark
for tourists in the future.
Although, the project has a value of only Bt0.32 per share, Figure 13, success for the
project would be a key to opening a new era for wind farms in Southern Thailand.
Currently, all commercial wind farms in Thailand are located in the Northeast.
Figure 2: Pak Phanang wind park is under construction
Figure 3: Some part of the wind turbines were delivered
from Goldwin
Source: Company data, KGI Research estimates
Source: Company data, KGI Research estimates
April 7, 2015
*The Company may be issuer of Derivative Warrants on these securities.
http://research.kgi.com; Bloomberg: KGIT <GO>
Please see back page for disclaimer
2
Thailand
Figure 4: Pak Phanang wind park is under construction
Source: Company data, KGI Research estimates
Figure 5: Wind park on the beach, a new landmark
Source: Company data, KGI Research estimates
Figure 6: The auspicious main post Brahmin ceremony
Source: Company data, KGI Research estimates
Figure 7: The auspicious main post Brahmin ceremony
Source: Company data, KGI Research estimates
Figure 8: The robe offering ceremony with local comminuty
at Pak Phanang
Source: Company data, KGI Research estimates
Inter Far East Engineering
Figure 9: The robe offering ceremony with local
comminuty at Pak Phanang
Source: Company data, KGI Research estimates
Another three larger wind farms, each 90MW
IWIND is studying another three wind farms in Southern Thailand; i) Koh Yai district,
Songkhla province, ii) Ron Phibun district, Nakhon Si Thammarat province, and iii) Bang
Lang Dam, Yala province. All three sites already have LOI and are awaiting PPA, which is
expected to be launched at midyear.
We had chance to visit the wind farm at Koh Yai and talked with an NGO leader during
the trip. We sense that IWIND’s wind farm at Koh Yai has strong support from the local
community, because the locals and NGO believe IWIND’s wind farm could be developed
to be a new landmark for tourists in Koh Yai and stimulate the local economy. Protests
by the local community and NGO are a key obstacle for other wind farms.
April 7, 2015
*The Company may be issuer of Derivative Warrants on these securities.
http://research.kgi.com; Bloomberg: KGIT <GO>
Please see back page for disclaimer
3
Thailand
Inter Far East Engineering
Figure 10: Micro-siting wind resource assessment at Koh Yai district
Source: Company data; KGI Research
Figure 11: The wind farm in South has been studied by PEA
Figure 12: The wind farm in South has been studied by PEA
Source: Company data, KGI Research estimates
Source: Company data, KGI Research estimates
Figure 13: Valuation
Power plant
Solar
Solar
Solar (Cambodia)
Solar
Biomass
Wind (Pakpanang)
Wind (Koh Yai)
Wind (Yala)
Wind (Nakorn Srithamarat)
Solar (Cambodia)
Wind (Korea)
Wind (Korea)
MW
13
17
20
100
37.5
10
87.5
90
90
80
33
100
%holding
100%
100%
100%
100%
100%
80%
80%
80%
80%
100%
20%
10%
Value/share
0.81
1.13
1.27
3.90
2.09
0.32
3.42
4.47
3.37
5.07
0.51
0.55
Total value per share
0.81
0.81
1.13
1.13
1.27
1.27
3.90
3.90
2.09
2.09
0.32
0.32
3.42
3.42
4.47
4.47
3.37
5.07
0.51
0.55
Status/Note
Operating
expect to achieve 2015
COD by 2H15
expect to achieve in 2015-2016
expect to achieve in 2017
COD by 2H15
COD by end 2015
expect to COD in 2016-2017
expect to COD in 2016-2017
expect to achieve in 2015-2016
expect to achieve in 2015
expect to achieve in 2018-2019
Value/share
26.92
Upside case
17.42
Base case
Source: Company data, KGI Research
April 7, 2015
*The Company may be issuer of Derivative Warrants on these securities.
http://research.kgi.com; Bloomberg: KGIT <GO>
Please see back page for disclaimer
4
Thailand
KGI Locations
China
Shanghai
Inter Far East Engineering
Room 1907-1909， Tower A, No. 100 Zunyi Road,
Shanghai, PRC 200051
Shenzhen
Room 24D1, 24/F, A Unit, Zhen Ye Building, 2014 Bao’annan Road,
Shenzhen, PRC 518008
Taiwan
Taipei
700 Mingshui Road, Taipei, Taiwan
Telephone 886.2.2181.8888 ‧ Facsimile 886.2.8501.1691
Hong Kong
41/F Central Plaza, 18 Harbour Road, Wanchai, Hong Kong
Telephone 852.2878.6888 Facsimile 852.2878.6800
Thailand
Bangkok
8th - 11th floors, Asia Centre Building
173 South Sathorn Road, Bangkok 10120, Thailand
Telephone 66.2658.8888 Facsimile 66.2658.8014
KGI's Ratings
Rating
Definition
Outperform (OP)
The stock's excess return* over the next twelve months is ranked in the top 40% of KGI's coverage
universe in the related market (e.g. Taiwan).
Neutral (N)
The stock's excess return* over the next twelve months is ranked in the range between the top 40%
and the bottom 40% of KGI's coverage universe in the related market (e.g. Taiwan).1.3
Under perform (U)
The stock's excess return* over the next twelve months is ranked in the bottom 40% of KGI's
coverage universe in the related market (e.g. Taiwan).
Not Rated (NR)
The stock is not rated by KGI Securities.
Restricted (R)
KGI policy and/or applicable law regulations preclude certain types of communications, including an
investment recommendation, during the course of KGI's engagement in an investment banking
transaction and in certain other circumstances.
Excess return = 12M target price/current priceNote
Disclaimer
April 7, 2015
When an analyst publishes a new report on a covered stock, we rank the stock's excess return with
those of other stocks in KGI's coverage universe in the related market. We will assign a rating based
on its ranking. If an analyst does not publish a new report on a covered stock, its rating will not be
changed automatically.
KGI Securities (Thailand) Plc. (“The Company”) disclaims all warranties with regards to all information contained herein. In no event
shall the Company be liable for any direct, indirect or any damages whatsoever resulting from loss of income or profits, arising by
utilization and reliance on the information herein. All information hereunder does not constitute a solicitation to buy or sell any
securities but constitutes our sole judgment as of this date and are subject to change without notice.
*The Company may be issuer of Derivative Warrants on these securities.
http://research.kgi.com; Bloomberg: KGIT <GO>
Please see back page for disclaimer
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