Energy Development Corporation (EDC) was registered and incorporated with the Securities and Exchange Commission on March 5, 1976.
The company is primarily engaged in the business of exploring, operating, developing, and utilizing geothermal energy and other indigenous renewable energy sources for electricity generation.
Currently, EDC is the country’s biggest renewable energy producer — delivering 1,472 megawatts (MW) from solar, hydro, and wind power, apart from geothermal.
Furthermore, EDC has the biggest wind farm with a 150 MW capacity. Its geothermal capacity of 1,200 MV also accounts for 61 percent of the country’s total geothermal capacity.
Its Parent firm, First Gen, has a portfolio capacity of 3,490 MW that constitutes 21 percent of the country’s gross generation capacity.
Market Cap: PHP 130.78 billion
Sector: Industrial
Subsector: Electricity, Power & Water
Earnings Highlights:
- The company saw slightly lower revenues at PHP 33.25 billion in 2017, lower by 2.86 percent versus 2016.
- The company booked a net income attributable to parent of PHP 7.71 billion last 2017.
Energy Development Corporation Delivers the Final Nail in the Coffin
The EDC Board of Directors informed the exchange on August 8, 2018, that it had approved the voluntary delisting of the common shares of the Company from the Philippine Stock Exchange. The trading for the stock was put to halt yesterday but resumed today.
Voluntary delisting of shares means that the management of the company intends to take the company private from being a public entity. The shares of the company will not be available for trading among brokers and stockholders who do not avail of the tender offer will become private investors.
These investors will still own their shares, but it will be difficult for them to:
1. Determine the value of the shares they’re holding
2. Find a buyer for their shares as they have to look for other people willing to buy it from them and will not be sourced through using brokers.
All rights inherent to a stockholder such as the right to vote, to inspect books, and to dividends are still available to them even if the company becomes private.
Tender Offer is Very Generous
The Company will conduct a tender offer of up to 2,040,006,713 common shares, which are collectively held by all EDC shareholders.
However, the figure does not include shares held by Red Vulcan Holdings Corporation (Red Vulcan), First Gen Corporation (First Gen), Northern Terracotta Power Corp (NTPC), and Philippine Renewable Energy Holdings Corporation (PREHC).
The tender offer price was determined to be Seven and 25/100 pesos (PHP 7.25). It is a 46 percent premium versus the closing price of PHP 4.95 before the trading suspension.
Morever, the offer is a 40 percent premium over the three-month volume weighted average price of PHP 5.18. KPMG evaluated the situation and stated that the offer price is fair and reasonable from a financial standpoint.
The offer period will run from September 25, 2018, to October 22, 2018. With the SEC’s approval, however, EDC may extend the offer period and may waive the threshold condition at its discretion.
For it to be considered successful, the offer is subject to a minimum of 1,162,000,000 common shares being tendered since it will bring down the percentage of public shares from 10.90 percent to less than 5 percent.
PSE has a 5 percent threshold and going below this level will allow the company for a voluntary delisting.
First Quarter’s Performance Disappointments
Revenues of the Company from the sale of electricity during the first quarter totaled to PHP 8.18 billion. This figure is lower by 14.90 percent from the recorded PHP 9.61 billion in the same period in 2017.
It was mainly attributable to the decrease in revenues from Unified Leyte due to unplanned outages caused by typhoons and earthquake. Cost of sales of electricity was also higher by 17 percent or PHP 584.8 million to PHP 4.02 billion.
The record was mainly due to more substantial purchased services and utilities, repairs and maintenance, and parts and supplies issued.
Net income of the company stood at PHP 1.50 billion for the first quarter, lower by 53.80 percent. This is in contrast with the recorded PHP 3.26 billion in the same period in 2017.
Net profit margin is only at 18.40 percent versus the remarkable 3.90 percent for the same period in 2017.
Should I Avail of the Tender Offer or Not?
The answer to this is quite tricky. If you’re okay with being a private investor and see that the company will be better off that way, then maybe you could hold on to your shares.
Nonetheless, do note that the downside is an illiquid market. It will be challenging for you to dispose your shares off.
Additionally, your shares will also be diluted versus those with bigger holdings.
Another thing to consider is your purchase price. If you bought below PHP 5.00, then you would already be 40 percent up today. That’s not bad.
However, if you purchased the stock for anything above PHP 7.25, don’t expect it to go anywhere above that shortly. You might as well stomach the loss, or risk being a private stockholder.
Volume
As of August 9, 2018, at 03:30 PM, the volume of EDC is 1,388.36% of the previous trading day.
Remember the correlation between price and volume.
- bullish price + high volume = high sustainability (price)
- bullish price + low volume = low sustainability (price)
- bearish price + high volume = high sustainability (price)
- bearish price + low volume = low sustainability (price)
Risk Level
EDC has an EXTREMELY-HIGH-RISK level due to its risk percentage of 149.15%.
Foreign Fund Flow
EDC registered a Net Foreign Selling worth P97,899,400.00 as of August 09, 2018.
On a 30-day trading period, EDC is on a Net Foreign Selling worth PHP140,486,762.00.
Top 10 Players’ Sentiment
Trading participants of EDC with a 100% Buying and Selling Activity as of Aug-09-2018 at 03:30 PM:
15 out of 86 participants or 17.44% of all participants registered a 100% BUYING activity
37 out of 86 participants or 43.02% of all participants registered a 100% SELLING activity
Top 10 Players’ Buying Average: 6.9982
Top 10 Players’ Selling Average: 6.9942
The psychological average price of the top 10 players as of Aug-09-2018 is from 6.9942 to 6.9942.
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