EEI CORPORATION (EEI)

Wow! I’m back. After a hiatus of 2 weeks of not even checking my blog and writing something, I’m here sitting in front of my laptop after an energy sapping weeks, but  a spirited and determined one .

Let’s get back to where I ended in my last blogs. As far as construction companies are concerned, we’ll take a look at EEI first. Actually I’ve done this two weeks ago  but my laptop was broken and too busy with my job. Paguwi ko sa bahay tulog na lang. Anyway, I’ve done a minor research on EEI two weeks ago pa and I just wanted to post it.

 Here you go…

EEI CORPORATION (EEI)

Fundamentals:

Huge Backlogs – the construction backlog of EEI is 12.85 billion

As of Sep 30, 2011 the company has 12.85 billion pesos backlogs including international operations. At the very least, its 2012 revenues are already secured partially by these backlogs. The company can complete this 12.85 billion in 2012, and 2013 and the years thereafter depending on the completion date of each project and the percentage it completes every year.

Backlogs:
Domestic		11.62 billion
International	Saudi Arabia	6.67 billion (13.61billion @ 49%)
	Singapore	384.27 million
	New Caledonia	182.4 million
Total		18.86 billion

Source: http://www2.pse.com.ph/html/ListedCompanies/pdf/2011/EEI_17Q_Sep2011.pdf

Petron Project

EEI Corp. is eyeing the second phase construction of Petron Corp.’s Fluidized Catalytic Cracker, which alone could double its domestic backlog and boost its overall revenues in the next two years.

EEI is hoping to secure a $200-million to $300-million contract for the Petron project, which is estimated to cost around $1 billion.

The project is seen to increase EEI’s backlog by P8.6 billion to P12.9 billion. Total construction backlog from domestic projects amounted to P11.62 billion as of the end of September 2011.

If EEI will get a piece of the action, it could boost EEI revenues further this year if the  construction starts this year and completed in 2013.

Source:http://www.philstar.com/Article.aspx?articleId=766068&publicationSubCategoryId=

PPP

The main catalyst of the growth in revenues for the construction companies.

154 billion pesos will be rolled out this year and if EEI could get a piece of the pie, it could further grow its revenues this year.

Source: http://www.abs-cbnnews.com/business/01/03/12/p154b-ppp-projects-be-rolled-out-2012

Financials:

In Year 2006 and 2007, the P/E ratio of EEI is 14.33 and 13.63 respectively. It bottomed in 2008 during the financial crisis with a 1.56 P/E ratio and slowly starting to go up again from then on. By year 2010, the P/E is 6.2. Can EEI go back again in its 14.33 and 13.63 P/E ratio?

One of the interesting facts on the financials of EEI is the reduction in the % of cost of goods sold. In 2007 and 2008, the cost of goods sold is 92% of the sales. In 2009, it became 86% and in year 2010, it is 84%. Year 2011 cost of goods sold should be around 84 to 85% based on its 9M2011. The management has been getting better in reducing the cost of goods sold. Efficiency is the name of the game.

2010 revenue is 6.9 billion pesos. 9M2011 revenue is already at 6.2 billion pesos. Factoring the 4^th quarter revenue will lead to an 8.3 billion pesos forecast for year 2011. 2012 forecast based on it’s 2007 and 2008 difference is 23% and my forecast is 10.2 billion pesos with a net income of 1 billion pesos.

A 1% decrease in cost of goods sold will result in 10 million pesos additional revenues for every 1 billion sales.

Today’s closing prices almost 5.22 and using it results in 5.18 P/E. It’s low.

Source: http://www.eei.com.ph/content/corporate%20governance/financial.php, PSE

Technicals

Citiseconline

RSI is a sell signal. Nangyari ito nang malapit ng magsarado ang stock market. Biglang bumaba ang mga stocks at nadamay na rin itong EEI. Lowest RSI since Dec 2011. Is this a sign of more downward movement or just forming a lower base? As always, in a bullish market, we always need a healthy correction para makgkaroon ng legs kapag umakyat uli. Let's see the activity on Monday if the price and volume will act towards a move upwards or downwards.

MACD is not in a good position also. Pababa yung kulay blue kaya downtrend ito. Pero kung contrarian investor ka kung saan kapag bumababa ang presyo saka ka bumibili, then you can buy. 

Summary:

With the Petron project looming, huge backlogs, and PPP forthcoming, the potential of EEI to have record revenues this year is achievable. I also like the efficiency of the management in lowering the cost of goods sold which is a big boost to the bottom-line