Beirut (APD) - The Kuwait-based financial and brokerage firm Global Investment House (GIH) on Monday reiterated its 'buy' recommendation on Qatar Electricity and Water Company (QEWC) for a medium to long term perspective.
GIH revalued QEWC's stock at a higher intrinsic value of QR 109.2, 16.3% more than its earlier estimated price of QR 91.3 per share and 38.2% above the company's share price on Sunday.
"The evaluation was based on the increased valuation factors in capacity expansions which are likely to take place between 2006 and 2009," the report said.
QEWC is a joint stock listed company managing Qatar's power generation and water desalination. For both utilities, it has the largest installed capacity in the country and accounts for 68.7% and 67.3% of the country's total power and water desalination capacities respectively.
To meet estimated demand growth of 10% in power and 9% in water, Qatar has announced several projects to improve the country's domestic power supply by 2015. It major projects are the Ras Abu Fontas-B (RAF-B), Q Power, and Mesaieed power and water desalination plants.
QEWC is expanding RAF-B stations, setting up a 567MW power plant and 29.9 MIGD water desalination plant. The project, scheduled to be operational by mid 2007, has capital outlay of about $522 million (QR 1.9 billion), which is likely to be funded to 75% by debt and 25% by the company's own funds.
"The earnings momentum from QEWC's existing operations and commencement of expansions at RAF-B as also at Q Power Q.S.C. and Mesaieed would provide re-rating triggers to the stock over the medium term," the report said.
Q Power Q.S.C. (Ras Laffan-B), another project currently being implemented by QEWC is estimated to cost around $895 million (QR 3.26 billion) and will have 1,025 MW of power generation capacity and 60 million of imperial gallons per day (MIGD) of water.
"We believe that the RAF-B project will commence its operations from FY 2007 and Q Power will start contributing to the company's revenues from FY2006 onwards," the report explained, expecting the company to maintain its leadership position in the sector.
In long term plans, QEWC has also formed a consortium to implement Qatar's largest power generation and water desalination project at Mesaieed Industrial City. The project is estimated to cost around $1 billion (QR 3.64 billion) and will have generation capacities for 2,000 MW of electricity and 40 MIGD of potable water.
Along with the estimated revenues from capacity expansions, Global Investment House based their evaluations on the company's financial performance during the past year.
"During 2005, Qatar Electricity & Water Company (QEWC) performed more or less in line with our estimates with variations (actual v/s projection)," the report commented.
In 2005, the revenue from the sale of electricity grew by 4.75% to QR 901.7 million while that from water segment registered a y-o-y decline of 2.73% to QR 579.9 million.
The company had accounted three items of non-recurring nature, namely QR 39.4 million as liquidated damages and fair value of spare parts received from Alstom, QR 117.9 million of reversal of provision for disputed revenue, and QR 20.8 million as share of income from joint venture.
"With regard to profitability, as in any other large scale projects, profitability of QEWC is likely to improve gradually," GIH concluded.
Shares of Qatar Electricity and Water Company lost 4.45%, trading Monday at QR 64.40 per share on a volume of 37,743 shares. [TS]
By Mirna Sleiman, APD Staff Writer in Beirut
© APD (Arab Press Digest) 2006
