SUMMIT POWER LIMITED

DSE: SUMITPOWER
BLOOMBERG: SUMITPOW:BD

Company Overview

Company Fundamentals

Summit Power Ltd. (SUMMITPOWER), sponsored by Summit

Group, is the first Bangladeshi Independent Power Producer
(IPP) in private sector supplying power to the national grid. The
company was incorporated as a private limited company in
1997 and converted in to a public limited company in 2004.

Market Cap (BDT mn)

The Principal activity of the Company is to set up power plants

and supply of electricity. The company owns and operates
eleven power plants at different locations across the country
having a total capacity of 317 MW. The Company has Power
Purchase Agreement with Bangladesh Power Development
Board (BPDB) and Bangladesh Rural Electrification Board (BREB)
for 15 years subject to extension of the term contract on the
basis of mutual agreement.

3-month Average Turnover (BDT mn)

The company has three subsidiaries namely Summit Purbachol

Power Company Limited (71.05% holding), Summit Uttaranchol
Power Company Limited (51.48% holding) and Summit
Narayanganj Power Limited (75.00%) holding. Moreover, the
company also holds 17.64% of ownership of Khulna Power
Company Limited (KPCL) and 30% of Summit Meghnaghat
power Company Limited. That means approximately 153
(50+103) MW has been added with the portfolio of Summit
Powers 317 MW from these concerns being the total capacity
of 417 MW for the company.

Financial Information (BDT mn):

The Firm was enlisted with the DSE and the CSE in 2015.
Around 53.50% shares are held by the Sponsors, while 16.10%,
25.96% and 4.44% shares are held by General, Institutional and
foreign investors respectively.

Industry Overview

28,759.3

Market weight

1.0%

No. of Share Outstanding (in mn)

826.4

Free-float Shares (Institute + Foreign + Public)

46.5%
8,264.2

Paid-up Capital (BDT mn)

16.7
-7.75%

3-month Return

34.8

Current Price (BDT)

26-49.8

52-week price range (BDT)

Sectors Forward P/E

12.1

2012

2013

2014

2015
(9m Ann)

Sales

5,893

6,192

6,109

6,274

Operating Profit

3,129

3,312

3,157

3,398

Profit After Tax

2,487

2,830

2,840

3,879

21,231

22,035

27,563

29,846

Assets
Long Term Debt

4,129

2,887

642

450

11,390

20,805
10/5

23,386

0/20

13,875
0/15

Gross Profit

61.5%

61.7%

58.2%

58.6%

Operating Profit

53.1%

53.5%

51.7%

54.2%

Pretax Profit

42.2%

45.7%

46.5%

61.8%

Net Profit

42.2%

45.7%

46.5%

61.8%

Equity
Dividend C/B)%

n/a

Margin:

Growth:

Fuel and power sector is considered as the most important

sector of the economy. Macro-economic indicators are greatly
influenced by this sector. As a developing country, the demand
for electricity is increasing day by day in Bangladesh. The
growth in demand is almost 10% a year. As on October 2015,
installed power production capacity was 11,877 MW.
Transmission and Distribution networks also improved over the
period. Population's access to electricity increased from 47% to
62% between FY08/09-FY12/13. Per capita electricity
consumption increased from 165 KWh to 226 KWh over the
same period. Transmission and distribution (T&D) losses
declined to 14% in FY12/13.

Sales

23.9%

5.1%

-1.3%

2.7%

Gross Profit

28.2%

5.4%

-6.8%

3.4%

Operating Profit

-5.0%

5.9%

-4.7%

7.6%

-19.1%

13.8%

0.4%

36.6%

ROA

12.1%

13.1%

11.5%

13.5%

ROE

23.0%

22.4%

16.4%

17.6%

Debt Ratio

22.2%

14.5%

10.5%

7.4%

Debt-Equity

41.3%

23.0%

13.9%

10.6%

Private sectors contribution in this sector is also notable amidst

governments effort. For instance, the share of private power
supply in terms of installed capacity increased from 26% in
FY2008 to 42% in FY2013. The total share of private power
supply reached 46% in January 2015.

Int. Coverage

4.5

6.3

7.6

14.0

Natural Gas is the prime source of fuel. As per BPDB data, the
generation capacity by fuel type, 61.82% of power producing
plants are natural gas based, 21.72% are HFO based, 8.22%
High speed diesel fuel based, 2.04% Hydro based, 1.77% are
coal based and 4.43% are imported. The Government offers
several facilities for private power companies and foreign
lenders in this sector such as income tax exemption, no custom
duty, VAT or other surcharges on import of plan and equipment
up to 10% of the original value up to 12 years, allowed to
repatriation of equity along with dividends freely etc.
1

Net Profit
Profitability:

Leverage:

Valuation:
15.4

13.2

13.0

9.0

Price/BV*

2.5

2.1

1.4

1.2

Restated EPS (BDT)

2.3

2.6

2.7

3.9

1.0

n/a

16.8

25.2

28.3

Price/Earnings*

DPS (BDT)
Restated NAVPS (BDT)

13.8

* Considering Restated EPS and NAVPS

Investment Positives

The company is implementing two new HFO-Fired Power

Generation plants under its two associated concern
namely Summit Barisal Power Limited and Summit
Narayanganj Power Unit II Limited with a total generation
capacity of 119 MW and 55 MW respectively. These plants
are expected to commence operation by Mach 2016
according to company officials. The company holds 49%
stake in each of the above company respectively
representing an additional 81 MW (appox.) capacity to the
companys existing net capacity.
The companys subsidiary Summit Narayanganj Power
Limited received a foreign currency term loan of USD 45
million at a rate of LIBOR plus 4%. This foreign currency
loan will help the company reduce its finance expense
notably.
The company has been various prestigious corporate
awards including ICMAB Best Corporate Award 2014,
ICSB National Award 2013 and Global CSR Excellence &
Leadership Award.

Five Years Restated EPS (BDT)

5.0

3.9

4.0

3.0
2.3

3.0

Year 2014

Year 2011

Year 2012

Year 2015 (9m

Ann.)

Source: Annual Reports & ILSL Research

Last Three Years' Price (BDT) Movement

60
50
40
30
20
Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

Jul-15

Source: DSE Website and ILSL Research

Pricing Based on Relative Valuation:

Multiple
9.5

Value (BDT)
37

Peer Trailing P/E

16.4

44

Sector Forward P/E

12.1

47

Sector Trailing P/E

12.6

34

1.7

49

Year 2013

1.0

Peer Forward P/E

2.7

2.0

Investment Negatives
The Company is enjoying tax exemption for 15 year
starting from its commercial operation. This expiration of
tax exemption period, if not extended, will reduce the
companys net profit margin significantly in the years to
come. Tax exemption for Summit power Limited will expire
in February 2016. Moreover, the tax exemption period for
st
Summit Narayanganj Power Limited will expire on 1 April
2016.
The Power Purchase Agreement (PPA) with BREB and
BPDB for the four plants of the company comprising of
total 135 MW out of total eleven plants of the company
and its subsidiaries will expire within 2017. Non-renewal of
the tenure of PPA for those plants may significantly affect
the Companys profitably in coming years.
Any policy level changes like, not extending the tenure of
IPP (Independent power producer) may drastically affect
the Companys ability to operate as going concern.
The Company has foreign exchange risk to some extent
due to purchase of spare parts and plant and machinery.
However, this risk is insignificant to the Company.

2.6

Peer P/B

Note: BARKAPOWER, SPPCL, KPCL and GBBPOWER have been considered as the
peer company for valuation purpose.

Concluding Remark
Summit Power Company Ltd. is one of the leading Independent
Power Plant (IPP) in Bangladesh. In its latest 9 month
performance the company reported 3.9%, 4.3% and 40.2% YoY
growth in revenue, operating profit and net profit (excluding
non-controlling interest) respectively. Drop in COGS, as a
percentage of sales is the prime reason for relatively higher
operating profit growth than that of revenue growth. Net profit
increased significantly due to addition of share of profit from
the companys associate concern Summit Meghnaghat power
Company Limited (SMPCL) on which the company subscribed
30% stake in December 2014.