Krungsri Securities (KSS) wrote that Gulf Development Public Company Limited (SET: GULF) has announced via the Stock Exchange of Thailand (SET) that the company will reduce its shareholding in the Pak Lay hydropower project in Laos, which has a capacity of 770 MW and is scheduled to achieve a commercial operation date (COD) in 2033.
GULF’s stake in the project will decrease from 100% to 49% through the sale of shares to its longstanding partner, J-Power, for a total transaction value of approximately THB 4.8 billion. J-Power has collaborated with GULF in managing Independent Power Producer (IPP) power plants under the GJP group for many years.
Krungsri adopts a neutral stance on this development, initially estimating a gain of approximately THB 1.0-1.3 billion for GULF. This is based on the price differential, as GULF previously acquired a 60% stake in Pak Lay for THB 4.1 billion.
Although the reduction in shareholding is expected to decrease GULF’s long-term profit after the 2033 COD by approximately THB 2.8 billion per year and lower the target price by around THB 2 per share, the move is considered a strategic restructuring.
This adjustment will help reduce the company’s long-term interest-bearing debt to equity ratio (IBD/E), positioning GULF to accommodate additional megawatt (MW) growth anticipated from the next version of Thailand’s Power Development Plan (PDP).
Following these, Krungsri Securities reiterates its ‘Buy’ recommendation on GULF, with a target price of THB 70.00 per share, citing the company’s strong capital base and readiness to benefit from potential opportunities in the next phase of the PDP, along with the current low risk of rising energy costs.
