Some comments just post DEMCO's SET presentation today.

PaulRen's picture
Company Visit

Just post their SET presentation today, let's absorb it all a bit. I think
some of the newer and key highlights are:

1) They will build more wind farms long into the future,
with Vietnam the next country to start with these.
2) They will SET list already next year this wind energy farm,
not in 2015 as was previously reported in some document by DEMCO, or by the
IFA, as I recall.
3) What happened in the 1st Q. will not happen again, it was a
start up issue/problem with the mega solar project. DEMCO is now geared up to
deliver many more profitable solar projects this year and beyond.
4) The discount rate of 19% used by the IFA to value these new
shares, is a sky high number (as I say) and a bit "aggressive" as
they said. Especially in the continued environment of record low interest
rates. Likely to drop again tomorrow? If the discount rate was say a more
reasonable/realistic 15% the fair price would be far higher. 

5) IFA says these new shares are not liquid and so deserve
a substantial discount. This is a gross exaggerations as I see it because as
DEMCO explained there is substantial interest by key others in buying into such
a viable economic social desirable project and in fact it is DEMCO which asked
Wind Energy holding for these shares. Anways, when the project is listed next
year this liquidity argument hold up anymore.

6) Engineering expenses are going up with DEMCO 200+
engineers on their payroll and such salaries increasing. This is a minor risk
factor but will be amortized by their mega projects planned.

I would add that we must all appreciate that both the Thai government and
the SET is very interested in getting many infrastructure funds off the ground,
especially of the green kind. The SET is fanatically trying to increase its
total market cap. next year and beyond -and since no large state enterprises
will be listed anytime soon, the only way to meaningfully get there is with
such large infrastructure funds. There is local tremendous investor appetite
for those. Its also obvious that the country needs to substantially beef up its
electricity generation capacity and prowess, over the next few years, and green
energy is one way to do this without environmental mega opposition besides
pollution. Realize there are 4 new projects planned just next year to be
commenced in 2015 for a total of 420 Mega Watts. (MW) and then more beyond
that. EGAT has approved to buy electric from them all. All 13 such planned
projects are well shown in a table on page 26 of their "Document for the
Extraordinary General Meeting of Shareholders", sent to all voting
shareholders a couple of weeks ago.

With DEMCO's stock price at 14.60 just now, my strong buy view is

Best Regards,

Paul A. Renaud.