Daily ShareChat: Energy Development

By Jenny Ruth

Wednesday 15th July 2009

Australia-based Energy Developments's shares are worth $A4.10 ($NZ5.09) in a competitive bid process, although there are several risks around that valuation including the intentions of its major shareholder, says Ben Brownette at Aegis Equities Research.

New Zealand's Infratil owns 32% of Energy Developments.

Earlier this month, Archer Capital raised its takeover offer for Energy Developments to $A2.80 a share, although the offer remains subject to an extensive list of conditions. Energy Developments has invited Archer to conduct due diligence over the next two or three months and has also invited other parties to conduct due diligence.

Brownette says he understands Infratil wants out of Energy Developments. "Infratil dumping its shareholding would create significant negative pressure on the share price," he says.

"Further, Infratil might be able to exercise significant influence over Energy Developments' four major shareholders which account for around 60% of the total scrip."

The Australian company's shareholders may wish to exit the stock after a number of years of poor performance and the market has clearly not seen value in the stock for some time, Brownette says.

While the company's board may see a $2.80 bid as too low, "we feel a wait-and-see approach is appropriate."

BROKER CALL: Aegis Equities Research rate Energy Developments as neutral.

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