A $66 Billion Investment Manager Cuts Bets on Thai Power Firms

(Bloomberg) -- A rally in the shares of Thai electricity generators may be outstripping their earnings outlook, according to Boston-based investment manager Grantham, Mayo, Van Otterloo & Co.

The firm has cut exposure to the sector, even as earnings potential and economic fundamentals underpin the overall Thai market, said Amit Bhartia, an emerging markets portfolio manager at GMO, which oversees about $66 billion of assets.

“We first bought them because they had very high dividend yields, with growth as an optional,” Bhartia said in an interview Wednesday in Bangkok. “Now, most investors instead are focusing on the growth that is expected to come through. So we decided to cut down our holdings.”

Bhartiasaid he now prefers Thai companies focused on the domestic market and infrastructure development.

The top gainers among Thai electricity generators include Gulf Energy Development Pcl, Global Power Synergy Pcl, B Grimm Power Pcl and Electricity Generating Pcl. Each has rallied about 20% or more in the past three months.

Gulf Energy now trades at about 76 times its estimated 12-month earnings, making it the second-most expensive equity on the Thai bourse based on that measure.

While Thai power firms have steady earnings from long-term power purchase agreements and a pipeline of overseas investments, valuations for some of the stocks may be unsustainable, according to Phillip Securities (Thailand) Pcl.

“It is understandable that power producers are attractive during an economic slowdown,” said Danai Tunyapisitchai, an analyst at Phillip Securities in Bangkok. “But their share prices have gone to a very expensive level.”

To contact the reporter on this story: Anuchit Nguyen in Bangkok at anguyen@bloomberg.net

To contact the editors responsible for this story: Sunil Jagtiani at sjagtiani@bloomberg.net, Margo Towie

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