Gas and Coal Economics, page-35

It was clear to anyone familiar with the investment thesis and Stuart Elliot’s credibility ( both integrity and construction skill) that Skeoch and a few others had integrated social media into their investment strategy in an attempt to scare non professional investors into selling to them in the index rebalance.

All investors should do to some level of homework and only rely on trust worthy advice from someone they have actually met instead of paying attention to someone on the internet they have never met before who could be incompetent or have nefarious intent (as in this case).

The thesis on this investment is pretty straight foward. EWC led and financially supported by Elliot can cost effectively build infrastructure assets in places that have challenging operating environments. We know that Elliot has a huge track record of doing this before with Hopewell (with Sir Gordon Woo) and then CEPA. 2 mins on the internet will tell you that.

The asset built in the Phillipines are far more valuable than the market is pricing them at. Again, 30 mins homework will tell you that the replacement cost of the Philippines assets are 2 billion USD plus. The Indonesian assets are also hugely valuable, as are the Australian gas assets when their business plans are completed and implemented.

The market is going to recognise this value soon. Successful investment is so often reliant on someone’s patience and temperament, never more so than in this case. I can tell you that there was 3-5 Representatives of the Australian Funds Managment industry at the AGM this week so it is safe to conclude there is zero understanding of the opportunity to 10x your money here. When a small few see the opportunity, and with liquidity being so low, momentum will pick up fast, then lazy managers who never did their homework and who are late will buy happily at $1.50 looking for the next 75c , taking EWC to my target price of $2.25. Bare in mind that a target price is not static so this probably rises over the next 2 years.

Now think longer term, and consider who is going to want these assets, given their strategic importance, with indigenous gas running out in Philippines and an emerging middle class in Asia all of whom use more electricity each year. I think it’s pretty obvious that a large US company with predominately gas acerage or a US exporting terminal will like the idea of diversifying down stream to become vertically integrated down the value chain. Alternatively the likes of a Total, Exxon or Royal Dutch Shell would see the advantage of owning the receiving and generation infrastructure.

Either way, there is significant optionality to be considered when valuing this company. The current share price is nowhere near reflective of this. Lucky this is the way markets work otherwise some would be out of a job