Maybank Expects a Strong 3Q Profit for CK from Profit Sharing, Pumping Backlog in 2021

The share of CH. Karnchang Public Company Limited (CK) was at ฿14.40/share as of 16:10 local time in Thailand on Monday, dropped ฿0.60/share or 4% with a trading value of 164 million baht.

 

Maybank Kim Eng has given a “BUY” recommendation on CH. Karnchang Public Company Limited (CK) with a target price at ฿24.00/share, citing an anticipation of a strong profit in 3Q20 at 600 million baht.

Maybank expected 3Q20 profit to stand out at THB600m (+841% QoQ, +192% YoY), driven by subsidiaries–profit share from CKP of about THB223m, profit share from BEM of THB185m, dividend from TTW THB232m and profit from the sale of investments in subsidiaries of about THB200m.

However, the construction business will not be good due to the low backlog, the estimated revenue recognition will be close to the previous quarter of THB3.95b, (-1% QoQ, -18 % YoY) and gross margin of 8.9%, vs 9% last quarter and 8.9% last year.

 

The backlog remains low at THB30b. Next year, the THB220b high-speed rail project linking 3 airports will begin construction, which should increase the backlog. Maybank expected new projects: 1) 1,410 MW Luang Prabang Hydro Power Plant, worth THB135b, close to Xayaburi project. The project should be finalised by this year. 2) THB127b Western Orange line. Envelope will be submitted on Nov 9. 3) Dual track railways, Denchai – Chiang Rai – Chiang Khong, and Ban Phai- Mukdahan-Nakhon Phanom (THB128b), TOR is scheduled by the end of this year. 4) THB100b Southern Purple Line, with progress, bidding opens in late this year or early next year.

 

4Q20 earnings will decline with the absence of dividend from TTW of THB232m and profit from investment of about THB200m. But profit should be close to 4Q19, which is about THB200m. In total, in 2020, net profit is forecast at THB789m, down 56%.