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Manila Water trading volume rises after billionaire takeover

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By Jobo E. Hernandez, Researcher

AYALA CORP. was among the most actively traded stocks last week after the Philippine Competition Commission approved Philippine billionaire Enrique Razon’s takeover of unit Manila Water Co., Inc.

A total of 994,220 Ayala Corp. shares worth P724.63 million were traded from Aug. 24 to 28, according to data from the Philippine Stock Exchange.

Ayala Corp. shares fell 1.3% to P733.50 apiece at the close of trading on Friday. The stock has lost 4.7% this year.

Investors might still be digesting the government’s approval of the takeover, Darren Blaine T. Pangan, head of online trading at Timson Securities, Inc., said in a Viber message.

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The commission approved the purchase by Trident Water Holdings Co., Inc. — a unit of Razon-led holding company Prime Metroline Infrastructure Holdings, Inc. — of a 51% voting interest in Manila Water.

Trident Water, which has interests in hotels, casinos, mining, infrastructure, power generation and distribution, and port services, will buy the controlling stake after subscribing to 820 million common shares of Manila Water’s unissued capital stock, the commission said in a statement last week.

The deal was unlikely to cut competition in the water supply market of the east zone concession area, the regulator said. It noted that as the sole water distributor in the area, Manila Water has a captive customer base and no downstream competitors.

Manila Water told the stock exchange in March Prime Infra would own 28% of the company after it buys 820 million shares at P13 each. At the time, Trident Water had not been incorporated.

The purchase will cut Ayala Corp.’s ownership in Manila Water to 30% from 41%. Public ownership will go down to 41% from 58%, while foreign ownership will decline to 9.18% from 10.41%.

The regulatory approval comes after Manila Water disclosed on Monday that it had received regulatory approval to increase its authorized capital stock to P4.4 billion after the Securities and Exchange Commission (SEC) approved changes to its incorporation articles.

The utility also said the SEC had approved the increase in its carved-out shares to 900 million unissued common shares, which are reserved for cash, properties or assets to carry out its business.

The commission’s approval might “spurred trading activity somewhat,” Regina Capital Development Corp. stock analyst Anna Corenne M. Agravio said in an e-mail. She added that the stock’s activity might have also been affected by the “leftover effects” from the MSCI rebalancing announced in mid-August that will take effect this week.

“We think its effect is only minimal,” she added.

Ayala Corp.’s net income plunged by 95.7% to P1.28 billion in the second quarter from a year earlier. First-half profit fell by 79% to P7.94 billion.

“As more developments unfold in the coming days, we’ll have to see how market participants interpret these new pieces of information,” Mr. Pangan said.

The coronavirus pandemic has seriously affected Ayala Corp.’s major business segments, Ms. Agravio said. “In our bear-case scenario, the conglomerate’s profits for 2020 will decline by double digits,” mostly dragged by unit Bank of the Philippine Islands’ increased loan loss provisions, she added.

Ms. Agravio put Ayala Corp.’s immediate support — the price that prompts traders to buy the stock — at P715, while Mr. Pangan put it at P700 to P710.

She put the share’s resistance level — the price that prompts traders to sell it — at P760 each.

The reactionary buying causes a stock price to stop dropping and start rising, while the selling causes the opposite.

“While P760 is where traders may experience some selling pressure given that this seems to be a minor resistance area, the P800 level remains as the major resistance level to clear,” Mr. Pangan said.

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