Outlier

By Marissa Mae M. Ramos
Researcher

METRO Pacific Investments Corp. (MPIC) was among the companies whose stocks saw renewed investor interest after President Rodrigo R. Duterte’s apology to Manuel V. Pangilinan and the Zobel brothers over his remarks about the businessmen’s companies in recent months.

Data from the Philippine Stock Exchange showed a total of 533.84-million MPIC shares worth P1.48 billion being traded last week, making it the fourth most actively traded stock in the local bourse that time.

Shares in the Pangilinan-led company closed higher by 11.3% week-on-week to P2.86 apiece from P2.57 apiece on April 30. Year to date, the stock is down 14.9%.

“The biggest driver [last] week was the reconciliatory message of President Duterte to MPIC’s principals (the Pangilinan Group) and the Ayala Group,” PNB Securities, Inc. President Manuel Antonio G. Lisbona said in an e-mail.

The apology, according to Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco, “deescalated the tensions” between the government and two of the country’s biggest water concessionaires — MPIC’s subsidiary Maynilad Water Services, Inc. and the Ayala-led Manila Water Co., Inc.

“The move has lowered the perceived regulatory risks and has brightened the prospects on negotiations, tilting its direction towards a favorable water concession contract for both parties,” Mr. Tantiangco said in a separate e-mail.

Mr. Duterte apologized to the Zobel brothers and Mr. Pangilinan in a speech last Monday, which he said was triggered by the businessmen’s assistance during the coronavirus disease 2019 (COVID-19) crisis. MPIC’s per-share price gained 13.5% the next day.

Mr. Duterte also said he was open to drafting new contracts for the water concessionaires.

Late last year, Mr. Duterte threatened to file economic sabotage cases against Maynilad and Manila Water over allegedly onerous provisions in their contract with the government.

As of December 31, 2019, Maynilad is 52.8% and 27.19% owned by MPIC and DMCI Holdings, Inc., respectively.

Members of the so-called “MVP Group” have been actively working with the government in building quarantine sites and providing necessary medical equipment and other basic needs for frontline workers.

In the first quarter, MPIC reported a lower core net income — the first in its history — brought by the adverse effects of the enhanced community quarantine (ECQ) in mid-March to contain the spread of COVID-19. Core net income in the first three months dropped by 6% to P3.4 billion while net attributable income declined by 47% to P1.9 billion.

“[T]he decline in its core net income could get deeper this second quarter amid the longer period of the ECQ in mainland Luzon…,” Philstocks’ Mr. Tantiangco said.

He said the company’s light rail segment would be “one of the most heavily hit segments” as its operations were halted during the ECQ and will be expected to operate at a limited capacity once Metro Manila transitions to a general community quarantine.

Earnings of MPIC will still be driven by its segments on power and water albeit hit by weaker economic activities in commercial and industrial properties, Mr. Tantiangco said.

He added that “toll operations are still expected to be weighed by reduced toll road traffic amid the restrictions inland travel brought by the quarantine.”

For PNB Securities’ Mr. Lisbona: “It is likely also that the implementation of toll rate hikes will be deferred to the latter part of the year, another factor that will weaken toll road earnings,” he said, adding that they expect the company’s utility and healthcare businesses to “remain resilient but not pick up the slack.”

Both analysts pointed out the company has been preserving its cash position by postponing share buy-back operations.

“Currently, MPI’s current ratio is at 1.37 times, which shows that it has ample liquidity in meeting short-term obligations. Debt-to-equity ratio, meanwhile, is at 1.04 times, higher than its 5-year average of 0.78 times. This means that the company is getting more tilted to debt financing,” Philstocks’ Mr. Tantiangco said.

“MPIC’s fundamentals are currently challenged and this is expected to weigh on its share price movement. On the upside, however, the share could get a boost if there will be further positive developments on the negotiations between the government and Maynilad,” he added.

Mr. Tantiangco placed MPIC’s support at P2.50 and resistance at P3.

PNB Securities’ Mr. Lisbona said the company “has since regained some composure” since the peak of panic selling on March 23 when it closed at P2.28 apiece.

“We see support at P2.28 and P2.40 and resistance at P3.00 to P3.18 for the short-term,” he said.

MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., maintains an interest in BusinessWorld through the Philippine Star Group, which it controls.

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