Hongsa Case Is Settled, No Negative Long-Term Impact

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Hongsa Case Is Settled, No Negative Long-Term Impact

Background

Banpu Public Company Limited is a Thai energy company and operates business in coal, power generation and integrated energy sectors.

[REITs]

See 2017 Hedge Fund Letters.

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Among its subsidiaries are Indonesian PT Indo Tambangraya Megah Tbk (ITMG IJ) that is engaged in coal mining and Banpu Power PCL (BPP TB) an Independent Power Producer in Thailand.

Business Description

BANPU operates coal-related businesses ranging from exploration and development to production of coal. Its coal reserves are in Indonesia, China, and Australia. BANPU’s presence in Indonesia is through its 65%-owned subsidiary PT Indo Tambangraya Megah Tbk (ITMG IJ).

The power business consists of a 79% stake in Banpu Power PCL (BPP TB) which has several coal-fired power plant developments in Thailand, Laos, China, and Japan. These include a 50% stake in PLCP Power Ltd., a 1,434MW plant in Map Ta Phut Industrial Estate, Rayong province and a 40% stake in Hongsa Power Co., Ltd. in Laos.

Hongsa Case

The verdict in the 10-year long Hongsa court case was announced on March 6. BANPU should pay the plaintiff Bt1.5bn plus interest of 7.5% p.a. from July 2007. This shouldn’t have any long-term negative impact on BANPU.

BANPU has made multiple acquisitions in US shale gas resources. The gas segment currently accounts for 1% of BANPU’s total revenue but is expected to grow. The natural gas is sold entirely to the US domestic market, mainly used for power generation.

Leadership

Chanin Vongkusolkit became CEO of BANPU in 1983 and was appointed Chairman of BANPU in 2016. He also holds board membership in multiple subsidiaries of BANPU and other energy companies in Thailand. His education consists of a Bachelor’s degree in Economics from Thammasat University, Thailand and an MBA from St Louis University, US.

Hongsa Case

Somruedee Chaimongkol took on the role of CEO in 2015 after serving as CFO of BANPU since 2006. Like Chanin Vongkusolkit, she also holds multiple board memberships in BANPU’s subsidiaries. She holds a Bachelor’s degree in Accounting from Bangkok University, Thailand and graduated from Harvard Business School in the year 2000.

World Class Benchmarking

Profitable Growth has consistently ranked below average and has not shown any clear trend of improvement.

Profitability was stable at #8 up until 2016 when the rank improved slightly to #7. Growth has had large fluctuations improving from the worst in 2015 to good ranks in 2016 and in the past 12 months.

Hongsa Case

Asset utilization has consistently ranked #7 whereas Profit margin has seen a good improvement in recent years.

Both Sales growth and Margin change have seen improvements from low ranks to become average over the years. Sales grow has had a consistent improvement in contrast to the Margin change that has fluctuated more.

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.

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