Razon entry drives Manila Water trade volume

NEWS of tycoon Enrique K. Razon, Jr. buying into Manila Water Co., Inc. made the listed water concessionaire the third-most actively traded issue last week.

A total of 173.45 million shares of Manila Water worth P2.37 billion exchanged hands on the trading floor from Feb. 3 to 7, data from the Philippine Stock Exchange showed.

Manila Water shares closed at P13.28 apiece on Friday, up 9.2% from P12.16 a week ago. Year to date, however, the stock’s share price has recovered by 36.9%.

“Several developments impact Manila Water during the week. First was the disclosure that [Razon-owned] Prime Metroline Holdings, Inc. signed a subscription agreement for the acquisition of 820 million common shares of Manila Water at P13 per share, which represents a 25% stake,” Mandarin Securities Corp. research analyst Zoren Philip A. Musngi said in an e-mail.

“Second, was the grant by [the Ayala group] of a 51% voting interest to Mr. Razon. Last was [last Friday’s] announcement of Prime Metroline’s intention to make a mandatory tender offer for Manila Water shares, where they’re looking to increase their stake, aside from the recent 25% buy-in,” he added.

In a separate e-mail, Timson Securities, Inc. Head of Online Trading and Trader Darren Blaine T. Pangan attributed the week-on-week increase to “positive investor sentiment” following Mr. Razon’s entry into the company.

“Foreigners have also been net buying on the stock throughout the week except on Friday as some investors chose to take profits,” Mr. Pangan added.

In its disclosure to the stock exchange on Monday, Manila Water said it had agreed to sell 820 million common shares, or a 25% stake, at P13 each to Mr. Razon’s infrastructure firm Prime Metroline, raising P10.7 billion in additional equity capital that Manila Water would use to “pursue its long-term strategic initiatives.”

Ayala Corp. said in a disclosure on Thursday that its executive committee approved giving Mr. Razon a 51% voting interest in Manila Water. This is through the granting of proxy rights by its wholly owned subsidiary Philwater Holdings Co. to Mr. Razon’s Prime Metroline — until he incorporates Trident Water, which will be the vehicle for the transaction.

Ayala Corp.’s Philwater currently owns four billion of preferred shares in Manila Water, representing 65.95% of voting shares in the company, the disclosure said. It added that upon the grant of proxy rights to Trident Water, Ayala Corp.’s effective voting interest in Manila Water will be reduced to 31.6% but would remain the biggest shareholder at 38.6%.

Moreover, a newspaper bulletin by Prime Metroline on Friday — which was disclosed to the stock exchange by Manila Water — said it is going to conduct the tender offer of Manila Water shares held by the public as part of its subscription to 820 million common shares in the water firm. As disclosed when the listed water firm announced the entry of Prime Metroline earlier last week, the shares will be offered at P13 each.

Manila Water, along with the other Manila water concessionaire Maynilad Water Services, Inc., is waiting on the government for a new concession term after President Rodrigo R. Duterte declared that there were onerous provisions in their previous contracts. These contracts were originally set to last until 2037, but Mr. Duterte threatened to cut this short.

Manila Water shares jumped to as high as P14.60 each on Monday before closing at P12.76. On Friday, however, the stock went down 11.2% to P13.28 per share from Thursday’s P14.96.

The company posted an attributable net income of P4.41 billion as of end-September, 10.6% lower than its bottom line of P4.93 billion in 2018’s comparable nine months.

Timson Securities’ Mr. Pangan said the company’s net income trajectory remains unclear “given the new contracts have not yet been released, and also because the strategic direction of the company under the new leaders have not yet been confirmed.”

“[The] nearest resistance to break may be set at its recent high of P15, while support level at P12.8 may have to hold. If not, P12 would be the next support level to watch,” Mr. Pangan said.

Meanwhile, Mandarin Securities’ Mr. Musgni placed the stock’s immediate support at P13 and resistance at P14 “given recent developments.”

“We expect Manila Water shares to trade in this range as more details regarding the supposed tender offer are released,” he said. — ECAJ