Is it A Buying Opportunity For EDC?

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source: http://www.renewbl.com

EDC (Energy Development Corporation) had been one of the heavyweights last year due to the various expansion projects within and outside of the Philippines. 

Recently its price drop again to the 5.50 level brought about by the news from Bacman's non-operation. A report from bworldonline.com says that Bacman is expected to operate this year.

source: http://www.energy.com.ph

With the sudden drop in price, in my personal opinion, it is a good time to enter again EDC. Looking at the price chart the stock is now oversold and on its bounce back to the 6.00 level.

Looking at EDC's latest data from reuters.com, the company is in good shape as far as fundamental are concerned. Its Current ratio still stands at 2.63 while Debt to Equity is at 194 which is still within the industry levels.

source: www.reuters.com

I don't know though until where the price will go down further so the best action to take is to buy small chunks of shares at a price lower than its previous closing price. 

How about you what is your take on EDC's latest price drop? Please share your thoughts in the comment box below.

Stock Market News: EDC eyeing expansion in Chile

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source: http://www.energy.com.ph

EDC to expand geothermal projects overseas

07/17/2011 | 04:37 PM 

Energy Development Corp. (EDC) may soon be operating 13 concession areas in Chile as part of its overseas expansion program.

EDC president and COO Richard Tantoco said they have also “submitted bids for five other concession areas in Chile" on top of the 13 applications for concession areas there.

The company, an affiliate of the Lopez-led First Gen Corp. is looking to becoming an international geothermal company.

“In 2010, we began to plant the seeds for global expansion in countries like Chile, Kenya and Indonesia and we hope to see these initiatives bear fruit in the next few years," said EDC chairman and CEO Federico Lopez.

In March this year, EDC set up EDC Chile Limitada, a subsidiary in Chile. EDC Chile Limitada is a limited liability company incorporation in Satiago, Chile, that explores, evaluates and extracts minerals or substances to generate geothermal energy.

Tantoco added that EDC is also looking into possible geothermal project areas in Indonesia, where they are also applying for greenfield concession areas.

“In Indonesia, progress has been slower as we continue to explore areas and consider joint venture with holders of concession areas," Tantoco said.

EDC has also received join venture offers from different countries, owing to their 35 year experience in geothermal technology, said Tantoco.

“Here, we will tread carefully and prudently, and work only in jurisdictions with attractive resource and favorable investment environment," he added.

The overseas projects are expected to begin in 2015 or 2016. Tantoco did not give cost estimates of the expansion but said that a geothermal project costs around $4 million per megawatt to develop.

In May this year, EDC posted a decline in net income for the first quarter of 2011 because of lower revenues and higher acquisitions costs, slipping 61.4 percent to P3.77 billion while core net income went down 61 percent to P1.23 billion.

EDC has 1,199 megawatts (MW) of geothermal capacity and 132 MW of hydro installed capacity. The company is also working on an 86 MW wind farm in Northern Luzon. - BC/KBK, GMA News

source: http://www.gmanews.tv 

My Personal Analysis: Energy Development Corporation

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source: http://www.energy.com.ph/

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: www.citiseconline.com

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 reuters.com) 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.

source:http://www.energy.com.ph/investor-relations/financial-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 www.beautifulmantra.blogspot.com