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UBS Key Calls - Asia
C hanges to Key Calls
Add KEPCO
We believe KEPCO is the beneficiary of a structural change in the Korean
electricity market, which could lead to more stable ROE, lower cost of capital and
a shift in investor perception of the stock. The Korean government announced on
Thursday that it will implement a fuel cost pass-through scheme starting on 1 July.
We view this as positive because 1) it adds visibility to KEPCO's earning, which
could lead to a lower cost of equity (beta is 1.0 now versus the regional average at
0.7); and 2) it signals a desire from the government to rationalise the market, which
could structurally lift KEPCO's ROE. Separately, we are also confident that
KEPCO will be able to raise its tariff by 4-5% ahead of July which will be a nearterm
catalyst. We think these developments could lead to significant upside to the
share price, currently trading at 0.45x PB. Our price target at Won40,000 has
incorporated a 5% tariff hike and is 36% above the current price, and a lower beta
at 0.8 could add another Won5,000 to our fair value.
Eleven live Key Calls
We have 11 live Asia Key Calls— Bank of Ayudhya, Cheung Kong Infrastructure
(CKI), China Unicom-H, Genting Singapore, ICBC-H, KEPCO, Lanco Infratech,
LG Display, OCBC, Shriram Transport Finance, and Sun Hung Kai P (SHKP). All
are rated Buy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Key Calls - Asia
C hanges to Key Calls
Add KEPCO
We believe KEPCO is the beneficiary of a structural change in the Korean
electricity market, which could lead to more stable ROE, lower cost of capital and
a shift in investor perception of the stock. The Korean government announced on
Thursday that it will implement a fuel cost pass-through scheme starting on 1 July.
We view this as positive because 1) it adds visibility to KEPCO's earning, which
could lead to a lower cost of equity (beta is 1.0 now versus the regional average at
0.7); and 2) it signals a desire from the government to rationalise the market, which
could structurally lift KEPCO's ROE. Separately, we are also confident that
KEPCO will be able to raise its tariff by 4-5% ahead of July which will be a nearterm
catalyst. We think these developments could lead to significant upside to the
share price, currently trading at 0.45x PB. Our price target at Won40,000 has
incorporated a 5% tariff hike and is 36% above the current price, and a lower beta
at 0.8 could add another Won5,000 to our fair value.
Eleven live Key Calls
We have 11 live Asia Key Calls— Bank of Ayudhya, Cheung Kong Infrastructure
(CKI), China Unicom-H, Genting Singapore, ICBC-H, KEPCO, Lanco Infratech,
LG Display, OCBC, Shriram Transport Finance, and Sun Hung Kai P (SHKP). All
are rated Buy.
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