The capital increase will initially squeeze the stock price, but it also opens an opportunity to buy GULF at a bargain price. After the rights offering is completed, the firm’s capacity to invest will expand substantially—opening huge scope for upside to our current forecast. Moreover, its multi-MW IPPs will gradually commence operating, starting Mar 2021; the positive news flows will boost the share price. We expect GULF’s core PER to fall from 78x in 2020 to 48x in 2021, so investors who have thus far avoided high-PER stocks may start building positions soon. BUY!
Missed our estimate, but still a new record
GULF reported a new record net profit for 2Q20 of Bt1,881m, up 17% YoY and a QoQ turnaround. That announced number missed our estimate by 14% (slimmer GM and smaller FX gains than assumed), but was in line with the consensus. Stripping out FX gains, core earnings would be Bt989m, little-changed YoY but up 7% QoQ. The core number was 6% short of our expectation (a slimmer GM than assumed), but was in line with the street.