By: IGI Finex Securities Limited
Kot Addu Power Company Limited posted earnings of PKR 9.8bn (EPS: PKR 11.13) in FY15, depicting a growth of 27%YoY, due to a) higher load factor, b) surge in penal interest income due to increased receivables from WAPDA and c) reduced cost of repair and overhaul. Along with the result, company announced cash dividend of PKR 4.75/share, bringing total cash dividend for FY15 to PKR 8.75/share.
The Government plans to divest its shareholding in KAPCO as its PPA is set to expire in 2021. We believe favorable terms for PPA extension along with the divestment will unlock the value. Furthermore, company is currently evaluating feasibility of 660MW coal based power plant with an estimated cost of $1bn at its current plant’s location.
KAPCO is currently trading at a FY16 P/E and P/B of 8.3 and 2.7. Our Jun-16 Target price for the company is PKR 85/share and we currently have a “Hold” call on the scrip.