An important update on a stock we like.

Thaistocks.com still rates Banpu a strong buy, especially at these levels. Although the company reported weak 3Q00 results, the numbers came out as expected. Most of the weakness was due to poor equity contribution from COCO (failure to ramp-up production due to equipment failures), weak coal sales (also primarily due to COCO's shutdown) and negative earnings contribution from the EGAT overburden contract. But again, this was as expected.

Since the end of 3Q, however, COCO is back up to full production, coal sales to COCO are back to contracted levels of 60,000 tons/month, and Banpu is operating its overburden work for EGAT on a non-contract basis. Operating on a non-contract basis allows Banpu to charge market rates, which should have a positive impact on 4Q sales and profitability.

Other developments include:Tri-Energy, Banpu's 700MW IPP project (37% stake) is expected to commence operations at the beginning of June. First year contribution to Banpu should be around THB 200 million, or THB 1 per share. 2nd year contrbution should double! Banpu will bid for the new Contract #5 overburden contract in mid-June. Winning this bid will add significantly to Banpu's NAV. Contract value should be around THB 13 billion over the 10-year life of the project. Banpu stands a better than 95% chance of winning this contract.

We still expect Sithe to exercise its option to acquire a 22% stake in COCO from Banpu by November, at the latest. If so, Banpu will realize nearly THB 5 billion in net proceeds, or almost THB 24 per share. If Sithe doesn't exercise, Banpu will receive a US$ 10 million fee from Sithe. Either way, not bad for Banpu. Banpu has recently bid on another large engineering project for EGAT. While this contract hasn't been publicly disclosed, we expect a win (which is likely) will result in over THB 8 billion of revenue, at 30% margins, over a 15-year period. I could go on, but you get the picture....

The above comment comes with compliments from "The Quest Fund", a quality value buyers fund which however has a very large minimum investment requirement of 10 million Baht. We trust this source and respect their analysises.  

Best Regards to all our Subscribers.