Power business drives MPIC profit in 1st half

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By Arra B. Francia

METRO Pacific Investments Corp. (MPIC) on Friday reported double-digit profit growth during the first six months of 2017, driven by its increased investments in the power sector, as well as the strong performance of its tollroads and hospital businesses.

In a statement, MPIC said its consolidated reported net income attributable to owners of the parent company jumped 12% to P7.8 billion for the first half, from the P7 billion in the same period last year.

The infrastructure conglomerate also posted 17% growth in its consolidated core net income to P7.8 billion in January to June period, against the P6.6 billion it generated in the same period in 2016.

“Our earnings growth reflects our increased investment in the power sector together with strong volume growth at our tollroads and hospitals businesses,” MPIC President and Chief Executive Officer Jose Ma. K. Lim said in a statement.

The bulk or 55% of MPIC’s operating earnings came from the power business, followed by the tollroads business with P2 billion or 21%. Water business contributed P1.8 billion or 19%, while the hospital group added P308 million or 3%, and the rail, logistics systems group contributed P104 million or 2%.

MPIC’s power business contributed P5.3 billion in the first half, 26% higher than the previous year, boosted by the step-up investments in Manila Electric Co. (Meralco) and Global Business Power Corp. (GBPC).

MPIC increased its stake in Beacon Electric Asset Holdings Inc. by purchasing the remaining 25% ownership in the firm at P21.8 billion in June 2017. The transaction brought MPIC’s ownership interest in Meralco to 45.5% from 41.2%, and in power generation firm GBPC to 56% directly and 6.4% indirectly.

Meanwhile, Meralco’s core net income for the period slowed by 3% to P10.1 billion, as higher operating expenses due to increased consumer load offset a 3% growth in distribution revenues. GBPC, meanwhile, booked a core net income of P900 million.

Metro Pacific Tollways Corp. realized a core profit of P2.1 billion, showing a 27% uptick following the 8% increase in systemwide average daily vehicle entries in its tollroads, reaching 590,462 vehicles for the period.

On the other hand, the aggregate core net income of Metro Pacific Hospital Holdings, Inc. increased 21% to P927 million, owing in part to the acquisition of new hospitals during the latter part of 2016.

Core net income of Maynilad Water Services, Inc. rose 2% to P3.7 billion primarily due to tight operating expense control.

An arbitral tribunal last month ordered the Philippine government to reimburse Maynilad at least P3.4 billion for losses incurred by Metro Manila’s west zone water concessionaire from delayed implementation of its rebased water rates.

“Our headline Core Income growth is satisfactory but the translation of this to earnings per share still needs more momentum. While our businesses continue to drive efficiencies, it is apparent that the combination of sizeable capital expenditures and cost reduction programmes in recent years must be matched with contracted tariffs for our shareholders to receive the returns they are due,” MPIC Chairman Manuel V. Pangilinan was quoted as saying in a statement.

“We look forward to settlement of the Maynilad arbitration award and remain committed to our infrastructure expansion program while holding close discussions with Government on how to resolve our various tariff issues. We are guiding to full year Core Net Income of P13.3 billion,” he added.

MPIC’s earnings for the January to June period comprised more than half of its full-year core profit target of P13.3 billion.

Asked if they expect a slower second half as they are about to hit the target, Mr. Lim noted weather differences could affect power and water consumption for the period.

“There’s normally some seasonality because of the cooler weather during the year that affects both water and the power,” Mr. Lim told reporters in a press briefing in Makati on Friday.

“Year-on-year growth of the step-up will work its way through… but I think for the second half in terms of the seasonality that (Mr. Lim) has referred to, we won’t see the same kind of growth that we’ve seen last year,” MPIC Chief Financial Officer David J. Nicol said.

The conglomerate has so far spent P15.4 billion in capital expenditures for the first half of 2017, excluding acquisitions.

PNB Securities President Manuel Antonio G. Lisbona said MPIC’s stock price could go up once investors digest the information on its first half results.

“As of now MPI is fully priced by the market, hence the stock is only marginally up today. Our estimated PE (price-earnings ratio) is around 22x which is on the expensive side, but as the market digests this news, we can anticipate an improvement in intrinsic value,” Mr. Lisbona 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 interest in BusinessWorld through the Philippine Star Group, which it controls.

Shares in MPIC gained a centavo or 0.15% to close at P6.69 apiece.