EDMI LtdEDMI Ltd

Rising on demand from Australasia and Europe

EDMI designs and manufactures electronic meters for the electricity

generating and distribution industries. Its products measure the transfer of

electricity between power stations, transmission companies, distributors and

end users such as consumers and industrial companies.

Deregulation leads to replacement demand. Deregulation of the electricity

market led to increased competition as consumers are able to choose their

preferred electricity supplier. Many utility companies use innovative tariff

structure to acquire and retain customers. They also analyse usage pattern of

customers through Automatic Meter Reading (AMR). Electronic meters

developed by EDMI have proprietary software that implements changes in

tariff structure and AMR via a range of communication option such as power

line communications (PLC) and GSM/GPRS. Replacing electromechanical

meters with electronic meters enables utilities to compete more effectively.Deregulation of the electricity

market led to increased competition as consumers are able to choose their

preferred electricity supplier. Many utility companies use innovative tariff

structure to acquire and retain customers. They also analyse usage pattern of

customers through Automatic Meter Reading (AMR). Electronic meters

developed by EDMI have proprietary software that implements changes in

tariff structure and AMR via a range of communication option such as power

line communications (PLC) and GSM/GPRS. Replacing electromechanical

meters with electronic meters enables utilities to compete more effectively.

Expanding into volume residential market with MK 7. EDMI?s core

products are three-phase electronic meters for Generation & Transmission

sector, such as MK 6 and MK 10. Financial performance in FY07 will be

driven by new product MK 7, its first single-phase meter targeted at the

volume residential sector. EDMI has already secured order of 40,000 units for

delivery to Energy Australia after MK 7 was certified in Mar 07. New version

with remote disconnect function will start shipping soon. Management expect

shipment volume of 100,000 units/year with demand from Australasia and

Europe. Concurrently, EDMI has started development work on MK 12

targeted at the Generation & Transmission sector for launch in FY08.EDMI?s core

products are three-phase electronic meters for Generation & Transmission

sector, such as MK 6 and MK 10. Financial performance in FY07 will be

driven by new product MK 7, its first single-phase meter targeted at the

volume residential sector. EDMI has already secured order of 40,000 units for

delivery to Energy Australia after MK 7 was certified in Mar 07. New version

with remote disconnect function will start shipping soon. Management expect

shipment volume of 100,000 units/year with demand from Australasia and

Europe. Concurrently, EDMI has started development work on MK 12

targeted at the Generation & Transmission sector for launch in FY08.

M&A activities targeted at new opportunities in a liberalised market.

Bayard Capital bought Australia-based Email Metering (electricity and gas

meters) in Aug 03 and Swiss-based Landis & Gyr (electricity meters) in Jul

04. Recently, Itron acquired US-based Actaris (electricity, water and gas

meters) for US$1.6b in Feb 07. These acquisitions are aimed at providing

integrated systems for communications, data management and customer

relationship management in a liberalised electricity market. EDMI is a

potential take-over target given its small market cap of S$68m.

EDMI?s top-5 customers are Energy Australia, British Gas, Provincial

Electricity Authority Thailand, Tenaga Nasional and Shanghai Power. It has a

good track record with five-year revenue CAGR of 24%. Valuation is

attractive with the stock trading at FY07 PE of 7.7x. BUY with target