Investing in Philippines: My Personal Analysis: East Asia Power Resources Corporation(PWR)

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Sunday, July 17, 2011

My Personal Analysis: East Asia Power Resources Corporation(PWR)

 


East Asia Power Resources Corp or PWR in the Philippine Stock Exchange has recently made noise with its sudden jump in price right after the take over of Century Properties.

Here is a detailed news regarding the take over of PWR by Century Properties as a backdoor listing of the said company to the Philippine Stock Exchange:

Century Properties takes over East Asia Power firm


MANILA, Philippines—High-rise property developer Century Properties Inc. has sealed a deal to take over 93.59 percent of dormant energy company East Asia Power Resources Corp. for P127.4 million.


In a disclosure to the Philippine Stock Exchange on Monday, East Asia said two deeds of assignment of stock had been signed to finally close the transaction resulting in Century’s acquisition of direct and indirect shares in the company.


Century Properties entered into the deal with a private shareholder, El Paso Philippines Energy Co. Inc., paving the way for its acquisition of 91.69 percent indirect stake and 1.88 percent direct stake in East Asia.


The deeds of assignment were required by the Bureau of Revenue for the “purpose of facilitating the payment of the tax implications and the release of certificate authorizing registration for both transactions,” the disclosure said.


Century Properties has committed to make a tender offer to other minority shares for P0.04 apiece, higher than the P0.038 per share purchase price for the 93.8 percent stake. The tender offer will cost the property group up to P9.12 million. (To read more please go to http://business.inquirer.net)


The company is a power generating company through its 3 Navotas barges but was shut down due to their inability to generate enough income to cover its operating cost. The sudden entry of Century Properties have given hope to investors that might lead to PWR's return to operation and also might be a window for other business ventures besides power generation.


Fundamentally speaking PWR is not a good stock pick. With a Current Ratio of 0.04 and a Debt to Equity Ratio of -1.17(due to a deficit about 8 billion as per March 2011 report) the PWR itself is illiquid and buried in debt. The main cause of such was due to the high cost of bunker oil the main resource from which the company generates electricity and the low price of the electricity.


The entry of Century Properties caught the attention of the investing public with the intention of the said company to offer minority shareholders so that it can wholly owned PWR.


The continuing rise of PWR's price already reached an overbought level but still I have no idea where will it lead to. Check the graphs below:




The price of PWR is being set to reach up to 3 or 5 pesos per share. Some speculate that with the backdoor being planned by Century Properties it might merged thus like what happened to other companies which underwent the same scenario its price will be go up once finalized thus investors kept on buying making the price continuously climbing.


The question now is can we still ride the price uptrend? I guess if you were able to get a hold of it last week at 1.50 level better take the profit this coming Monday or any day of the coming week if the price starts to go down. As of last Friday the stock price jumped from 1.95 to 2.62 which is a whopping 34% increase over a day. Always remember that a stock price with such price trend will experience the same drop at a fast rate that is why it is advised to be careful. When you feel that it starts to pullback better sell before you end up losing. On the other hand as everyone is hoping that it would continue to go up and break out. If that happens all I can say is congratulations to those who got hold of it while it is still at 1.50 level.



1 comment:

Anonymous said...

Very well said. Bazura stock.

Chitika