November 30, 2014

EDC’s target price revised higher to P9.35/sh

In a Company Update we released today, we upgraded our target price on Energy Development Corp (EDC) to P9.35/sh from P9.10/sh previously. Our revised estimates reflect our higher revenue assumption for EDC’s 130-MW BacMan geothermal power plant following a recent visit of the project site and lower WACC assumption to 8.8% from 9% given changes to our debt forecasts.

EDC implemented a retrofit of the BacMan power plant that effectively added around 10 MW of new capacity. EDC is also working on the possibility of applying the same approach with its Tongonan and Palinpinon 1 power plants, which could augment the power plants’ capacity by around 10% in 2016-2017.

There are other power projects planned for development as well although a final decision will be only made by 2015- 2016. With growth expected to remain elevated in the near term, we reiterate our Buy rating on EDC. Our revised target price of P9.35/sh implies a potential upside of 14%, in addition to a dividend yield of 3.1%. – WealthSec