Flash Note LUCK: Investment in coal power project; a likely upside As per notice on Karachi Stock Exchange today, BoD of Lucky Cement Ltd (LUCK) have recommended for setting up a 660MW coal-based power plant in Karachi. Total project cost is estimated at USD1.08bn (~PKR100bn) and will be financed with a debt-equity of 75-25. The company will invest PKR27bn of equity through a wholly owned subsidiary into Lucky Electric Power Company Ltd (LEPCL). Note that the company had initially planned to have 75% stake in LEPCL through its subsidiary Lucky Holdings Ltd with equity investment of PKR20bn. We had earlier estimated (refer to our report: “Estimates revised; Maintain hold”, dated September 5, 2014) that the project shall add value of PKR58/sh of LUCK . We now revise up our NPV estimate for the project to PKR78/sh, factoring in 100% equity share for LUCK (instead of 75% assumed earlier). However, owing to the uncertainties that exist over actual implementation of coal-based power plants, we await financial close and necessary regulatory approvals before incorporating for the project in our price target for LUCK. Our Jun-15 PT of PKR415/sh of LUCK offers total return of 12% from last closing price. We maintain hold but highlight strong potential upside stemming from the expected investment.
Posted on: Tue, 16 Sep 2014 11:15:18 +0000
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