Company Report

PHILIPPINE EQUITY RESEARCH

Metro Pacific Inv. Corp: Providing clarity on the negative news flows
Field Notes
09 JUNE 2011

SHARE DATA ERC final determination sets higher tariff. The ERC approved its final determination on MER’s
Rating BUY revenue application for the 3rd regulatory period covering 2012-2015. The approved price for
Ticker MPI 2012-2015 is Php1.5828/kwh-Php1.5817/kwh. Although this is 3.7% lower than Meralco’s current
Price Target (Php) 4.67 rate of Php1.646/kwh, it is 4.8% higher than the Php1.458/kwh average rates proposed by the
Current Price 3.38 ERC in the initial draft determination announced in January. Other important details on the final
Upside (%) 38.16 determination such as MER’s maximum allowable operating expense and capex were not yet
disclosed.

Pushing through with the 600MW coal plant. Management said that the planned 600MW coal
plant will push through and the final details will be released soon. Based on Meralco’s initial plans,
the 600MW power plant will consist of two 300MW units, with a cost of ~ US$2.1Mil/MW. The cost/
MW is relatively higher since Meralco will be using a more advanced technology that will result to
ABSOLUTE PERFORMANCE (%)
better cost efficiency and capacity utilization throughout the life of the plant. Completion date is
1M 3M YTD
estimated to be 2014 for the first unit and 2015 for the second unit. Management said that Meralco
MPI -3.98 -4.25 -13.11
wants majority control of the plant – an amount that is slightly higher than 50%.
PSEi 0.86 9.15 1.28

Turnover of SCTEX to push through, slight delays for new toll road projects. Despite the
recent spate of negative headlines surrounding the SCTEX deal, management is confident that the
turnover of the SCTEX will occur soon, with minimal changes from the original agreement. The
announcement could take place as early as next month. Meanwhile, management sees delays of
three to six months in the completion of NLEX segment 9 and 10 due to the slower than expected
MARKET DATA (Php)
pace of the government’s acquisition of right of way for the projects.
Market Cap 74,897.16 Mil
Outstanding Shares 22,158.92 Mil
Maynilad to have lower billed volume growth due to supply constraints. Management
52 Wk Range (Php) 2.48-4.44 reduced its internal growth target for billed volume of 12% to 8-10% for this year. This is largely
3 Mo Ave Daily T/O 78.53Mil due to the 7% reduction in water supply from MWSS during 1Q11. Going forward, management is
confident that reduced water supply from the MWSS will no longer constrain billed volume growth
due to the reduction in its NRW. Its 100MLD Putatan plant is also already operational.

FORECAST SUMMARY (PhpMil)

Year to Dec. 31 2009 2010 2011E 2012E
Sales 16,107.7 18,124.7 21,244.5 24,613.6
% change y/y - 12.5 17.2 15.9
EBIT 6,778.4 10,205.4 13,291.0 16,462.7
% change y/y - 50.6 30.2 23.9
EBIT Margin (%) 42.1 56.3 62.6 66.9
EBITDA 10,069.0 14,019.7 17,653.7 21,399.3
% change y/y - 39.2 25.9 21.2
EBITDA Margin (%) 62.5 77.4 83.1 86.9
Net Profits 2,299.6 3,552.7 5,799.8 7,963.9
% change y/y - 54.5 63.2 37.3
NPM (%) 14.3 19.6 27.3 32.4
EPS (Php) 0.11 0.16 0.26 0.36
% change y/y - 40.3 63.2 37.3

RELATIVE VALUE
P/E(X) 29.6 21.1 12.9 9.4
P/BV(X) 1.5 1.4 1.2 1.1
RESEARCH CONTACT
ROE(%) 4.5 6.5 9.6 11.6
George Ching Dividend yield (%) 0.0 0.0 0.0 0.0
george.ching@citiseconline.com *Source: Citiseconline estimates
 09 JUNE 2011

INVESTMENT RATING DEFINITIONS

BUY HOLD SELL

Over the next six to twelve Over the next six to twelve Over the next six to twelve
months, we expect the share months, we expect the share months, we expect the share
price to increase by 15% or price move within a range of price to decline by more
more. +/- 15%. than 15%.

TOP PICK DEFINITION

A stock that is included in our “Top Pick” list has to meet the following criteria: 1.) It must belong to a sector with neutral to positive outlook; 2.) It must
have double digit earnings growth for the current and the succeeding fiscal year; 3.) Its share price appreciation potential must be above 15% as of the
date it was included in the list; and 4.) It must have an upward intermediate term trend.

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MPI/Field Notes/ page 2