EDC (Energy Development Corporation), A Tsunami Stock

Since 2009, I have seen the potential of this company because its business is Power, which is rapidly growing in the Philippines. In fact, next year, the total capacity of the all the power plants is at the critical level due to high power demand. Law of supply and demand will favor the companies in these sector but EDC has more advantage. With the oil price expected to surge up due to Middle East revolution and Japan crisis, EDC will be the least affected since its fuel are renewables (Geothermal, Hydro or Water and they will start the Wind next year).

Below is my e-mail to my friends last month, Feb 17 when EDC stocks is at 5.5+ level.

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From: 조날드
Sent: Thursday, February 17, 2011 8:24 AM
To: (deleted)
Cc: (deleted)
Subject: why I'm buying EDC stocks

I bought a lot of EDC shares last Tuesday for the following reason:

1. My valuation for the said stocks is P7.5 per share while current share is at 5.5 which means the upside is 36%

2. Return of Equity and Net Profit is stellar for the past 5 years.

3. The said company is fast growing due to the higher demand for power… which are expected to increase at higher rate on the next 5 years.

4. It is a very active stocks.

5. There’s a lot of insider buying as shown below:

Date	# Share	Price	Who
2011-01-18	200000	5.99	Senior Vice President
2011-01-20	5000	5.92	Corporate Information Officer
2011-01-25	27100	5.83	Chairman and CEO
2011-01-25	972900	5.83	Chairman and CEO
2011-01-26	375000	5.8	Senior Vice President & Compliance Officer
2011-01-26	281250	5.8	Vice President, Power Generation
2011-01-26	281250	5.8	Vice President, LGPF
2011-01-26	281250	5.8	Vice President, BGPF
2011-01-31	3000	5.79	Corporate Information Officer
2011-02-01	2000	5.7	Corporate Information Officer

This is  a total of 2,428,750 with average weighted stock price of 5.83. There are many reasons for insider selling and most of them are to liquidate for personal needs but there’s only 1 reason for insider buying…it means the stock is cheap and profitable in the future.

In addition, starting April this year, FGEN has a call option to buy EDC shares at strike price of 6.19 per share….(12.5% upside from the current price). For my current holdings, I’m expecting a 50% upside since some of my shares were bought at 4.55 level since June last year (now I understand the importance of PATIENCE and LONG TERM INVESTMENT).

Just my 2 cents.

Regards,

조날드

Process Engineer

Offshore & Special Ship Piping Design Team

 “A Filipino is pliant like a bamboo. Neither typhoons nor monsoons could break the Filipino spirit; like the bamboo, it sways and bends with nature’s relentless onslaughts, but it refuses to yield or die.”

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One of my friend who also bought shares that time was very happy to informed me that the shares have gone up. I don't check stock prices recently due to my work and studies and I was surprise that indeed the price goes up and with big volumes....a tsunami of EDC stocks....

I also found out that they already release their annual report for 2010 so I will be reading them and share you my analysis soon. As a sweet bonus, they will be giving away dividends at PhP0.16 per common share (EX-DIV 24Mar2011, RECORD DATE 29Mar2011, PAYOUT 22Apr2011).  This is 2.54% of  the closing price last Friday, Mar 18. Well this is not bad compared to the 0.5% earnings if I keep my money in the savings account, right?

Well, I'm expecting the same will follow for FGEN and FPH since both these companies are related to EDC (they have shares with each other and so they can be considered as one company).

Again, I would like to remind everyone that above were just my opinion based on my analysis of the data. Past Performance is No Guarantee of Future Results and so Invest Wisely.