Image via WikipediaEEI Corp.Recommendation: LONG-TERM BUY
ANALYSTS tagged Yuchengco-led EEI Corp a "long-term buy" as it is considered one of the second-liner stocks that is likely to boom this year given its diversified business operations.
For one, Wealth Securities, Inc. analyst Bernard C. Aviñante said consumers’ continuous demand for properties would keep EEI’s local business buoyant.
Angping & Associates, Inc. analyst Elizabeth S. Abadillo concurred and said that despite investors’ cautious stance amid the upcoming May elections, EEI Corp. remains a "good" stock to watch out for given its growth potential.
"The property sector remains in demand so I think it could create an upside bias on EEI’s stock price although the movement would only be limited." Ms. Abadillo said. "But apart from its local business, the company continues to be liquid due to its overseas operations," she added.
Mr. Aviñante said EEI’s projects abroad would reflect positively on its financial health.
Since 1974, the company has ventured into petroleum, power plants and industrial installations in the United Arab Emirates and Saudi Arabia.
"Through its 49%-owned joint venture firm Al Rushaid Construction Co., [EEI] has an orders book backlog totaling $338 million (or P15.12 billion) as of February (this year). Completion of these projects is spread until 2012," Mr. Aviñante said in a research paper.
"These engineering works are mainly in vital industries such as oil and gas and power generation, which are pillars of growth for (Saudia Arabia)," he added.
With Saudi Arabia ’s projected budget of about $300 billion in the aforementioned industries, this would likely present opportunities for EEI. "Capturing even a small fraction of that pie would significantly push its bottom line," Mr. Aviñante said.
He forecasts EEI’s income to surge by 38% to P777 million this year from the unaudited amount of P563 million last year, while revenues are expected to jump by 34% to P8.442 billion by the end of the year from P6.3 billion in 2009. The figure, however, is 8.14% short from the company’s 2008 revenues of P9.19 billion.
But analysts noted a possible growth in the company’s revenues and income in the coming years by the time its business operations here and abroad are reflected into EEI’s financial report.
"At least its first quarter report would give a glimpse of the company’s performance this year. I think it would be released by the first week of May so investors will have to watch [out for] that," Ms. Abadillo said. Meanwhile, in terms of valuation, EEI is currently trading at a 4.5x price-to-earnings ratio.
Mr. Aviñante said EEI is targeted to reach the 7x multiple by the end of the year, with a P5.25 apiece fair value estimate. It closed at P3.30 per share. Ms. Abadillo said the best price to accumulate the stock is between P3.10 to P3.15 per share.
Ma. Aizl Camille B. Cabarles
http://www.bworldonline.com/Research/stockpicks.php?id=0610
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