ACE: Results Are Not Stunning, Stay on HOLD

We upgrade our recommendation on ACE to HOLD from SELL based on raising our target price to Bt3.49 from Bt2.64, implying an upside of 8% from the current price. We think ACE deserves to trade at a premium to the Thai sector due to its pronounced growth prospects, we use a target 2020E PE of 29.4x.

Investment thesis:

• Power producer with high growth potential, but already priced in
• Long-term contracts and supply control drive high profitability
• Government driven demand can pose a risk

Interim: ACE has delivered good 2Q20 results and follows up on its continuous expansion plan, justifying high growth prospects. We revise our forecast upward to account for the strong results.

Risks: Adverse regulatory changes, reliance on a few customers, volatility in fuel prices, unexpected disruptions in production, delays in project execution, change in political leadership can sometimes impact companies.