Energy World Corporation Limited

EWC Details

Energy World Corporation Limited (ASX: EWC) is an independent energy company. Its scope of the work includes production and sale of power, as well as the development of LNG projects.

FY21 Results Performance (For the Year Ended 30 June 2021)

• EWC has delivered revenue of US$149.4 million in FY21, down by 6.2% YoY compared to US$159.2 million in FY20.
• The company’s net profit reduced to US$1.8 million in FY21 from US$12.3 million owing to the impact of various one-off developments.
• Revenue from gas sales in Indonesia declined US$3.8 million on account of differences in the pricing structure of the gas supply between the two years and disposal of a 49% stake, effective March 2021.

Source: Company Reports, Analysis by Kalkine Group

Activities Report

In the press release dated 29 October 2021, the company disclosed the activities undertaken during the quarter ended 30^th September 2021. The company has continued to implement the required as well as suggested recommendations of the national and local regional level governments in all areas of its operations, with respect to the prevailing COVID-19 pandemic. Further, in the quarter, it has made expenses towards PT Energi Sengkang payment for gas purchases as well as power plant operation and maintenance costs for Indonesia, among others.

Key Risks

The company is exposed to contractual risks related to power, gas and LNG sales. Further, its dependent on third parties in order to finish the supporting infrastructure or deliver timely fuel sources also remains a potential risk. Additionally, exploration and development risks and water supply, mechanical and electrical risks are some other potential risks.

Outlook

The company is progressing with the work on reactivation of the Eromanga and Gilmore Gas fields in Australia. Currently, it is finishing the remaining licensing and permitting proceeds to start the recommencement activities and work in Q4FY21. In the Philippines, it has maintained with its land acquisition programme for the Right of Way (ROW) and the soil investigation engineering studies have been finished for the initial transmission towers.

Stock Recommendation

EWC has delivered 6-months and one-year returns of ~+8.14% and ~+57.43%, respectively. The stock is trading lower than the average of the 52-week high price of $0.159 and the 52-week low price of $0.048. Meanwhile, the ROE of the company for FY21 stood at 0.1%, significantly lower than the industry median of 8.3%. Further, the company’s net margin remained significantly lower at 1.2% in FY21 compared to the industry median of 12.0%. Considering the aforementioned factors, the current trading levels, rally in stock prices, and the associated business risks, we advise the investors to book profits. We give a “Sell” rating on the stock at the current market price of $0.098 per share as of 15 November 2021, at 11:33 AM (GMT+10), Sydney, Eastern Australia.

EWC Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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