Out for a few days, Stock Thought: FGEN

Out for a few days

I am currently working on our finals requirements in MBA (deadline June 1) and I won’t be able to post in this blog for a few days but I will post an interesting situation about FGEN.

FGEN

FGEN made a disclosure that is perceived by the market as very bad:

Fire incident at San Lorenzo power plant owned by FGP Corp.

Well… I agree and 250 MW power of San Lorenzo’s 500 MW power capacity may spell foregone revenues but the decline, in my opinion, is an overreaction. It’s just a temporary event and these situations are opportunities for an investor.

I added our position in FGEN (my client’s account) @ 20.45.

How much is the temporary impact? Below is my calculation:

ST_5-28-13

 

*I do not know how much is the contract price between MER and FGEN but I assume it to be at P5.

I made this post not as a recommendation to BUY FGEN but I would like to document my thinking in the situation where obvious (in my opinion) opportunity arises for our future reference and as a case study. I may be right or wrong but in any way, we will learn from it.

Thesis: Events that has temporary impact on earnings should not affect a company’s intrinsic value.

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