TUESDAY, 17 NOVEMBER 2015

First Gen Corporation:

9M15 earnings beat estimates on EDC and hydro plants

better than expected results
Excluding non-recurring items, FGENs recurring net income declined by 4.4% to US$129Mil,
representing 87.7% 83.7% of COL and consensus forecast. Earnings beat estimates mainly due to
the better than expected performance of FG Hydro and EDC. The gas plants also performed better
than expected. The Sta. Rita and San Lorenzo gas plants reported total earnings of US$103.4Mil,
up 1% y/y, representing 81.2% of our full year forecast.

EDC 9M15 results beat forecast on higher than expected revenues. Excluding one-offs,
EDCs 3Q15 core net income declined 2.7% to Php2.34Bil. This brought 9M15 net income to
Php7Bil, ahead of COLs forecast (representing 82.1% of our full year forecast), and in line with
consensus forecast (at 75.5% of consensus full year forecast) Revenues were stronger than
expected, with 9M15 revenues rising 10% to Php25.3Bil, representing 78.4% of our full year
forecast. Revenues beat expectations mainly due the higher than expected revenues of the
Pantabangan-Masiway hydro plant, the Pal-Tong and the Burgos Wind.
Hydro plant revenues beat forecast on higher than expected output. Earnings of the
Pantabangan-Masiway hydro plant declined 38.5% to Php546Mil mainly due to the lapse in the
plants income tax holiday beginning 2015. However, the results were still better than expected
as it represents 106% of our full year forecast. Total sales output exceeded our forecast. While
output only increased marginally by 0.5% to 365Gwh, the said volume already represented
95.8% of our full year forecast. Sales through bilateral contracts and WESM declined 2.9% to
213.8Gwh, due to lower water availability this year. However, this was offset by higher ancillary
service volume of 151Gwh, up 5.6% y/y. The Pantabangan-Masiways higher than expected
sales volume was partially offset by the plants lower than expected tariff, which fell 8% to
Php4.34/kwh. This is 3.8% lower than our full year forecast due to the lower selling price of its
ancillary service.

SHARE DATA

BUY

Rating
Ticker
Fair Value (Php)
Current Price
Upside (%)

FGEN
34.10
22.10
54.30

SHARE PRICE MOVEMENT

110

100

90

80

70
17-Aug-15

17-Sep-15
FGEN

17-Oct-15

17-Nov-15

PSEi

ABSOLUTE PERFORMANCE
FGEN
PSEi

1M
-9.98
-4.01

3M
-14.26
-8.58

YTD
-17.25
-6.33

FORECAST SUMMARY
Year to Dec. 31
Sales (US$Mil)
% change y/y
EBIT (US$Mil)
% change y/y
EBIT Margin (%)
EBITDA (US$Mil)
% change y/y
EBITDA Margin (%)
Net Profits (US$Mil)
% change y/y
NPM (%)
EPS (US$)
% change y/y

2012
1,527
12.0
320
53.0
21.0
383
41.2
25.1
186
431.3
12.2
0.042
336.8

2013
1,914
25.4
379
18.2
19.8
538
40.5
28.1
118
-36.5
6.2
0.0212
-49.3

2014
1,909
-0.3
564
48.8
29.5
728
35.3
38.1
193
63.6
10.1
0.0417
96.7

2015E
1,966
3.0
514
-8.8
26.2
689
-5.3
35.1
146.5
-24.1
7.5
0.0290
-30.5

2016E
2,192
11.5
685
33.3
31.3
879
27.5
40.1
183.1
25.0
8.4
0.0390
34.5

RELATIVE VALUE
P/E(X)
P/BV(X)
ROE(%)
Dividend yield(%)

12.2
1.29
12.95
0.00

24.0
1.08
6.83
2.26

12.2
0.97
10.10
1.67

17.5
0.86
6.77
3.28

13.0
0.81
7.94
2.28

*Source: COL est imat es

MARKET DATA
Market Cap
Outstanding Shares
52 Wk Range
3Mo Ave Daily T/O

80,906.84Mil
3,660.94Mil
21.30 - 31.80
45.33Mil

George Ching
george.ching@colfinancial.com

PHILIPPINE EQUITY RESEARCH

9M15 earnings beat estimates on EDC and hydro plants

better than expected results
FGENs 3Q15 net income declined 59.1% to US$24.6Mil. This brought 9M15 earnings to US$119.9Mil,
down 26.4%, representing 81.8% and 77.9% of COL and consensus full year forecasts respectively.
Excluding non-recurring items such as EDCs reversal of impairment charges on the Northern
Negros Plant in 2014 and higher forex losses for this year, recurring net income declined by 4.4% to
US$129Mil, representing 87.7% 83.7% of COL and consensus forecast. Earnings beat estimates
mainly due to the better than expected performance of FG Hydro and EDC. The gas plants also
performed better than expected. The Sta. Rita and San Lorenzo gas plants reported total earnings
of US$103.4Mil, up 1% y/y, representing 81.2% of our full year forecast.
Exhibit 1: FGEN 3Q15 results summary
3Q14
3Q15
Net revenues
490.7
434.4
EBT
128.5
54.3
EBIT margin (%)
26.2
12.5
Net Income
60.2
24.6
Net margin (%)
12.3
5.7

in US$Mil

% Change
-11.5
-57.7
-13.7
-59.1
-6.6

9M15
1,399.6
238.1
17.0
119.9
8.6

% of FY COL forecast
71.2
73.2
81.8
-

source: FGEN and COL estimates

EDC 9M15 results beat forecast on higher than expected revenues

EDC reported a 43.5% drop in 9M15 net income to Php5.9Bil. Last years earnings included a
Php2Bil impairment reversal on the Northern Negros plant, while this years net income included a
Php1.0Bil forex loss. Excluding one-offs, EDs 3Q15 core net income declined 2.7% to Php2.34Bil.
This brought 9M15 net income to Php7Bil, ahead of COLs forecast (representing 82.1% of our
full year forecast), and in line with consensus forecast (at 75.5% of consensus full year forecast)
Revenues were stronger than expected, with 9M15 revenues rising 10% to Php25.3Bil, representing
78.4% of our full year forecast. Revenues beat expectations mainly due the higher than expected
revenues of the Pantabangan-Masiway hydro plant, the Pal-Tong and the Burgos Wind.

Hydro plant revenues beat forecast on higher than expected output

Earnings of the Pantabangan-Masiway hydro plant (which FGEN has a 70% effective stake) declined
38.5% to Php546Mil mainly due to the lapse in the plants income tax holiday beginning 2015.
However, the results were still better than expected as it represents 106% of our full year forecast.
Total sales output exceeded our forecast. While output only increased marginally by 0.5% to 365Gwh,
the said volume already represented 95.8% of our full year forecast. Sales through bilateral contracts
and WESM declined 2.9% to 213.8Gwh, due to lower water availability this year. However, this was
offset by higher ancillary service volume of 151Gwh, up 5.6% y/y. The Pantabangan-Masiways
higher than expected sales volume was partially offset by the plants lower than expected tariff, which
fell 8% to Php4.34/kwh. This is 3.8% lower than our full year forecast due to the lower selling price
of its ancillary service.

TUESDAY, 17 NOVEMBER 2015

FGEN

EARNINGS ANALYSIS

page 2

PHILIPPINE EQUITY RESEARCH

Maintain BUY rating

We have a BUY rating on FGEN with a FV estimate of Php34.1/sh. We continue to like FGEN due
to its investment in renewable energy company EDC, and its stable core earnings, brought about
by the Sta. Rita and San Lorenzo gas plants, which have long term take-or-pay contracts for all of
their generation capacities. FGENs growth outlook also improved significantly with the new Avion
and San Gabriel gas plant projects. The two new gas plants are set to boost FGENs attributable
power generating capacity by 23.5% to 2,679MW by 2016. Growth prospects could improve further
assuming that the Sta. Maria gas plant expansion pushes through.

TUESDAY, 17 NOVEMBER 2015

FGEN

EARNINGS ANALYSIS

page 3

PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY

HOLD

SELL

Stocks that have a BUY rating have attractive

fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.

Stocks that have a HOLD rating have either

1.) attractive fundamentals but expensive
valuations; 2.) attractive valuations but
near term earnings outlook might be poor
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

We dislike both the valuations and

fundamentals of stocks with a SELL rating.
We expect the share price to underperform in
the next six to twelve months.

Important Disclaimers
Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411

TUESDAY, 17 NOVEMBER 2015

FGEN

Fax: +632 635-4632

EARNINGS ANALYSIS

Website: http://www.colfinancial.com

page 4