Investing in Philippines: My Personal Analysis: Energy Development Corporation


Sunday, March 27, 2011

My Personal Analysis: Energy Development Corporation

Energy Development Corporation (EDC) is the Philippines's pioneer and leading geothermal energy generator for the past 30 years. This Lopez led company which was formerly under PNOC has tapped the Philippines's renewable energy source. 

EDC is primarily engaged in geothermal exploration and development. Other areas of their operation includes Reservoir Engineering and Management, Steamfield Commissioning, Operations and Maintenance, Environmental Management, Energy Research and Development, Project Planning and Construction and
Engineering Design

EDC also has a subsidiary in Chile, EDC Chile Limitada, to bag possible contracts to build and operate geothermal plants in Chile. An excerpt from BusinessWorld states that EDC has extended Letters of Credit amounting to $80 million for financial support(click here to read the entire article

Looking at EDC's 10 year price graph it shows a remarkable cup and handle formation:

 Below is the one year price graph:

Graphs source:

The cup and handle formation may indicate an expected uptrend in the coming weeks or months. A short rise in price was noted after the handle formation. The price of EDC has been up for the past two weeks and expectation of an uptrend will be seen in the coming days or weeks.

Notable news about EDC are their recent bagging of 7 power supply contracts  with electric cooperatives in Leyte and Negros and the 31% increase in net income for FY 2010. Also EDC has recently issued a $300 million bond to support their expansion projects(click here to read full story).

Looking at EDC fundamentally, current ratio is at a healthy 1.97 indicating liquidity primarily due to proceeds of bond offering and settlement of Yen denominated loans. Due to the nature of the industry the company has a Debt to equity ratio of 1.28 indicating that the company is leverage by using debt to finance expansion projects.  

Net income as compared to last year increase by 31% due to increase of electricity sales. PE ratio TTM(trailing twelve months) is at 27.56 against industry of 7.42 while Price to Book Value MRQ(Most Recent Quarter) is at 3.71(source this indicates that the EDC share is at a level we can say that is not overprice nor underprice. With the recent expansion programs which are likely to materialize due to approval of long term loans, EDC's price has been seen by analyst to go up in the coming weeks. With the latest developments in EDC, investors are now unto it thus a high PE ratio is generated.

Below are screenshots of EDC's FY2010 reports.

In my opinion EDC is a good buy for the long term. The energy sector is one of the things that is necessary in the growth of the country and use of renewable energy is now preferred due to the latest nuclear crisis in Japan. Current projects and expansion programs of EDC are seen as potential for the next years thus recommendation for it is for long term. 

Again this is just my opinion as always TRADE AT YOUR OWN RISK. 

PS. To read more technical analysis of stocks check my beloved's blog

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