Upbeat 1QFY16 results with profit up 27.4% y‐y and 48.5% q‐q

　　GLOW announced a set of upbeat results in 1QFY16 with net profit up 27.4% y‐y and 48.5% q‐q toBt2,764mn. In this period, much of the strong showing was chiefly credited to (1) a rise in grossprofit margin to 28.51% from 18.42% in the year‐earlier period and 24.65% in the prior quarterthanks largely to a retreat in costs of natural gas, its fuel source of electricity production whichwidened the gap between revenue from electricity sales and expenses from electricity production,(2) a decline of 17.1% y‐y and 31.1% q‐q in interest expenses to Bt652.26mn on lighter debt load,(3) a FX gain of Bt305.48mn, and (4) a total gain of Bt29.37mn from compensation for constructiondelay and insurance claim for business interruption at GHECO‐One.

　　2QFY16 outlook slightly pressured by Ft rate cut but FY16 earnings view unchanged

　　For 2QFY16, the earnings outlook may come under slight pressure from a 0.28 satang/unit cut in Ftrate for the May‐Aug 2016 period but the continued downward trend in gas prices may help limitthe impact of Ft rate cut on gross profit margins in 2QFY16.

　　For the meantime, we leave our FY16 profit outlook for GLOW unchanged at Bt8,105mn, down3.1% y‐y. In our view, potential culprits behind the profit slide include (i) a decline in availabilitypayment rate under PPA of GLOW IPP and (ii) a fall in electricity output of HHPC to 394 Gwh from440 Gwh due to a drop in rainfall volumes in FY15.

　　Solid dividend profile over the next couple of years

　　No major investments in new power plant projects is expected over the next couple of years dueto its policy of investing in projects that yield good returns only. This investment policy has ledGLOW to sit on a huge pile of cash on hand which was enough for it to pay a total dividend ofBt5.75/share which included both regular and extra dividends in FY15. Our forecast also suggestsGLOW will continue to pay total dividends at the same rate as in FY15 of Bt5.75/share in FY16‐FY17 each, translating into a yield of roughly 6.48%.

　　‘ACCUMULATE’ rating with FY16 target price of Bt92.75/share

　　We rate GLOW an ‘ACCUMULATE’ with a FY16 target price of Bt92.75/share. The rating is based onits compelling and consistent dividend profile. Our forecast puts its FY16‐FY17 dividends atBt5.75/share each.