Equity Method

Ms. Yupapin Wangviwat, Chief Financial Officer of Gulf Energy Development Public Company Limited (GULF), stated that the company chose an accounting records for Intouch Holdings Public Company Limited (INTUCH) by using an equity method, which would benefit the company in booking profit and loss than the consolidation method the requires an asset consolidation of Advanced Info Service Public Company Limited (ADVANC). Mr. Suwat Sinsadok, FSS International Investment Advisory Securities (FSSIA), stated that the decision of GULF in choosing an equity method is to exclude ADVANC’s assets for consolidation due to assets of the latter consist of many spectrum licenses. Thus, the consolidation method will result in lower earnings around 2,000 million baht per year. Currently, GULF holds 42.25% shareholding in INTUCH in which INTUCH holds stakes in ADVANC and THCOM in sequence. The equity method will only allow a purchase price allocation on THCOM that will create an amortization around 10 million baht per year, which is insignificant for GULF. In the meantime, GULF will realize profit from INTUCH around 1,600 million baht in 3Q21, resulting in estimated record-high earnings of 3,000 million baht. Moreover, the reopening will also have a positive impact on GULF over an increasing demand for electricity, coupled with the Thai-Vietnam National Energy Plan that GULF could acquire more power plant projects. Initially, FSSIA gave GULF a “BUY” rating with a target price at Bt47 per share, excluding earnings from INTUCH. A source from a securities company also added that the equity method will lower GULF interest-bearing debt to equity ratio from 2.5x to 2.0x, which is higher than the level of 1.6x from consolidation method, but will result in lower earnings around 2,000 million baht due to ADVANC’s amortization. In addition, the IBD/E at 2.0x will allow GULF for more borrowing power around 100,000 million baht.