MPIC weighed down by Duterte remarks on water firms

By Mark T. Amoguis
Senior Researcher

PRESIDENT Rodrigo R. Duterte’s tirade against Metro Manila’s water concessionaires last week led investors to unload shares of Metro Pacific Investments Corp. (MPIC) as it is the controlling stakeholder of water firm Maynilad Water Services, Inc.

Data from the Philippine Stock Exchange showed 281.16 million MPIC shares worth P1.12 billion were traded from Dec. 2-6, making it the seventh most actively traded issue in the local bourse.

The stock was lower by 14.9% week-on-week to P3.66 per share last Friday, from P4.3 per share. Year-to-date, the stock is down 20.6%.

“The major factor that pushed MPIC’s price downward was the threat of President Duterte to charge Maynilad… with economic sabotage,” said PNB Securities, Inc. President Manuel Antonio G. Lisbona in an e-mail interview last Friday.

On the evening of Dec. 3, Mr. Duterte threatened to file economic sabotage cases against water concessionaires Manila Water Co., Inc. and Maynilad over supposed onerous provisions in their contracts with the government.

His threat followed Ayala-led Manila Water’s disclosure on Nov. 29 that the Permanent Court of Arbitration ordered the Philippine government to pay the company P7.39 billion, among others, for the losses incurred because of the Philippines’ breach of its obligation.

Salvador S. Panelo, chief presidential legal counsel and presidential spokesman, said on Wednesday Mr. Duterte directed the Department of Justice and the Office of the Solicitor General to draft and prepare new contracts favorable to the state.

Maynilad is 52.8% and 25.24% owned by MPIC and DMCI Holdings, Inc., respectively.

It primarily caters to west zone of Metro Manila, which is composed of the cities of Manila (certain portions), Quezon City, Makati, Caloocan, Pasay, Parañaque, Las Piñas, Muntinlupa, Valenzuela, Navotas and Malabon as well as cities of Cavite, Bacoor and Imus and the towns of Kawit, Noveleta and Rosario in the province of Cavite.

“Investors sold down MPIC shares pushing the price to below P4.00 on Dec. 4, 2019, a level we have not seen since 2012,” Mr. Lisbona said.

Following Mr. Duterte’s tirade, MPIC shares went down 10.7% to P3.92 per share last Wednesday, a level not seen in more than seven years or since its closing price of P3.80 per share last March 14, 2012.

“The news heavily impacted the water companies,” said AP Securities, Inc. Senior Research Analyst Rachelle C. Cruz in a phone interview last Friday.

“Most likely, this will put more pressure on the earnings of Maynilad as well as MPIC, the parent company. This has affected the sentiment especially MPIC because its portfolio is heavily regulated…” Ms. Cruz added.

In the third quarter, MPIC’s revenues increased by 3.3% to P21.98 billion. This brought the company’s top line for the first nine months to P66.6 billion, an 8.6% year-on-year gain.

Meanwhile, attributable net income in July to September reached P3.7 billion, 4.2% more than last year’s comparable three months. Year to date, it is down 5.5% to P11.8 billion.

Aside from water, MPIC has businesses in power, toll operations, health care, rail, and logistics, among others.

“I think, given that the selloff has already peaked, we might see some rebound especially some investors who might go bargain hunting already,” Ms. Cruz said moving forward.

Ms. Cruz placed the stock’s support and resistance levels at P3.5 and P4, respectively.

PNB Securities’ Mr. Lisbona pegged the stock’s support at P3.5 and resistance at P4.2.

“The situation is so fluid at this point but the odds are that the direction will be more biased downwards,” 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 interest in BusinessWorld through the Philippine Star Group, which it controls.