I exited EWC far too early as it turned out, and missed much of the last run up. Still a nice earner and on the watchlist. I understand the argument that there is value to be released.
My concerns always centred around poor communication, timetables that didn’t seem feasible and Elliot’s priorities. To me it seemed he was rather too good at getting others to pay for development costs by securing new funding after talking the price up (rather too soon after increasing his holdings at considerably lower prices, and avoiding significant personal dilution). He is a wheeler/dealer by nature.
Secondly, there are numerous related party contracts signed with EWC. Some appear likely to favour Elliot long term. You can’t determine the terms of most, but it’s illogical that 100% owned Elliot companies can produce the most competitive service from EWC’s perspective – the Slipform (HK) construction contract being the current big one.
Another example is the Philippines LNG hub land, purchased by Elliot and leased back to the EWC on a 20 year lease. There are now some 16 years left. When fully developed at that location, it becomes highly valuable with many more years of life left in it. What happens when the lease expires? My guess is that it’ll be terminated or renewed for 10 years on significantly more expensive terms. This is because (imo) it’s likely that leasee improvements (ie the terminal facilities, paid for by EWC), revert to the landlord on expiration of the lease.
These thoughts are part from intuition and part from research / experience. Perhaps all parties will do nicely in the end, but interested if others have considered these possible conflicts.
EWC Price at posting:
53.0¢ Sentiment: None Disclosure: Not Held
