THURSDAY, 06 FEBRUARY 2014

Metro Pacific Investments Corporation:

Toll road segment takes a positive turn SHARE DATA
Rating BUY
We are raising our FV estimate for MPI by 5.06% to Php5.05/sh, after factoring in the earnings Ticker MPI
contribution of the newly announced NLEX Metro Expressway Link Project. We expect this project Fair Value (Php) 5.05
to boost the toll road segment’s earnings to a 5-year CAGR of 21.1% from 2013E to 2018E. Due Current Price 4.24
to the improvement in the earnings outlook of the toll road business, we are increasing our 2014E Upside (%) 19.10
and 2015E earnings forecast of MPI by 1.9% and 9.1% to Php7.92Bil and Php7.94Bil, respectively.
We are also upgrading our rating on MPI to a BUY as the stock’s capital appreciation potential has
improved in light of the new project. At MPI’s current price of Php4.24/sh, upside to our FV estimate
is already attractive at 19.3%.
SHARE PRICE MOVEMENT

• NLEX Metro Expressway Link is the catalyst to the toll road segment’s earnings growth. 110

Assuming that the NLEX Metro Expressway Link Project will be completed as scheduled and
barring any delays in obtaining toll rate tariff increases from the government upon the completion 100
of the projects, we expect the segment 9 to lead to an 8% increase in traffic volume by in
2014E and a 2.4% increase in revenue per entry (excluding inflation tariff adjustments). For the
90
segment 10.1, we estimate that traffic volume will increase by 1% beginning 2016E, and that
average revenue per entry will rise by 6.9%. Lastly, upon the completion of the segment 10.2 in
2017, we expect the NLEX’s traffic volume to increase by 10% and average revenue per entry 80
6-Nov-13 6-Dec-13 6-Jan-14 6-Feb-14
to rise by 23%.
MPI PSEi

• We increased our 5-year earnings forecast for MPI’s toll road business to a CAGR of 21.1% from
Php1.1Bil in 2013E to Php2.9Bil in 2018E. This is a significant jump compared to our previous
forecast wherein we only assumed that MPI’s earnings from the toll road business would grow
by a CAGR of only 12.4%. Given the added contribution of the NLEX Metro Expressway Link ABSOLUTE PERFORMANCE
Project, we believe that the toll road business will become the most valuable asset in MPI’s
1M 3M YTD
portfolio as the earnings contribution of this segment will increase to 34.4% of MPI’s 2018E net MPI -2.53 -11.13 -2.08
income, up from 14.9% in 2013E. Given the increase in our earnings forecast, we are raising PSEi -0.86 -8.38 0.75
our NAV estimate for the toll road business by 15.65% to Php56.3Bil, representing 38% of MPI’s
NAV.

MARKET DATA
Forecast Summary (PhpMil)
Year to Dec. 31 2011 2012 2013E 2014E 2015E Market Cap 110,089.87Mil
Sales 22,070.1 27,806.8 30,943.2 34,837.0 38,935.8 Outstanding Shares 26,025.97Mil
% change y/y 18.9 26.0 11.3 12.6 11.8 52 Wk Range 4.06 - 6.33
EBIT 11,605.3 13,491.1 16,911.3 17,611.9 18,945.5 3Mo Ave Daily T/O 117.71Mil
% change y/y 35.4 16.2 25.4 4.1 7.6
EBIT Margin (%) 52.6 48.5 54.7 50.6 48.7
EBITDA 14,463.4 16,890.8 20,131.2 21,790.2 23,989.3
% change y/y 30.2 16.8 19.2 8.2 10.1
EBITDA Margin (%) 65.5 60.7 65.1 62.5 61.6
Net Profits 4,633.0 6,388.2 7,343.5 7,920.8 7,945.4
% change y/y 61.4 37.9 15.0 7.9 0.3
NPM (%) 21.0 23.0 23.7 22.7 20.4
EPS (Php) 0.18 0.25 0.28 0.30 0.31
% change y/y 61.4 37.9 15.0 7.9 0.3
George Ching
RELATIVE VALUE
P/E(X) 23.8 17.3 15.0 13.9 13.9 g e o r g e . c h i n g @ c o l fi n a n c i a l .c o m
P/BV(X) 1.5 1.4 1.2 1.1 0.0
ROE(%) 6.3 8.0 7.8 7.8 7.2
Dividend yield (%) 0.6 0.6 0.7 0.7 0.7
*Source: COL est imat es
 PHILIPPINE EQUITY RESEARCH

Raising FV estimate and upgrading to BUY due to the expansion of the toll road
business

We are raising our FV estimate for MPI by 5.06% to Php5.05/sh, after factoring in the earnings
contribution of the newly announced NLEX Metro Expressway Link Project. We expect this project
to boost the toll road segment’s earnings to a 5-year CAGR of 21.1% from 2013E to 2018E. Due
to the improvement in the earnings outlook of the toll road business, we are increasing our 2014E
and 2015E earnings forecast of MPI by 1.9% and 9.1% to Php7.92Bil and Php7.94Bil, respectively.
We are also upgrading our rating on MPI to a BUY as the stock’s capital appreciation potential has
improved in light of the new project. At MPI’s current price of Php4.24/sh, upside to our FV estimate
is already attractive at 19.3%.

Exhibit 1: Changes in Forecast

2014E 2015E
Old New % Change Old New % Change
MNTC traffic volume (in Mil entries) 63 67 6.9 65 72 11.0
MNTC revenue per entry (in Php) 118 129 9.3 127 135.3 6.5
MNTC net income (in PhpMil) 1,702 1,833 7.7 2,056 2,778 35.1
MPI net income (in PhpMil) 7,775 7,921 1.9 7,285 7,945 9.1

source: COL estimates

Exhibit 2: The NLEX Metro Expressway Link Project

Segment 9 Segment 10.1 Segment 10.2

Length (in km) 2.4 5.7 8.2
Project cost (in PhpMil) 1,700 6,000 21,500
Expected increase to NLEX traffic volume (%) 8.0 1.0 10.0
Expected increase to toll tariff (%) 2.4 6.9 23.0
Expected date of completion 2Q14 2Q16 2017
source: COL estimates

Only the bad news priced in

MPI’s share price has declined by 32.7% since its peak in May 2013. The stock has also
underperformed the PSEi which fell by 20.2% during the same period. MPI’s lackluster share price
performance was mainly due to Maynilad’s ongoing arbitration with the government and concerns
that MER’s earnings could decline in the next regulatory period beginning 2015. However, we believe
that those negative developments are already priced-in by the market.

On the other hand, since the signing of the JV between MPI and the government for the segment
10.2 of the NLEX Metro Expressway Link Project was only announced last month, we believe that
most investors have yet to factor in the potential impact of the project on MPI’s profitability and fair
value.

Thursday, 06 February 2014 MPI I COMPANY UPDATE page 2

 PHILIPPINE EQUITY RESEARCH

NLEX Metro Expressway Link is the catalyst to the toll road segment’s earnings
growth

The NLEX Metro Expressway Link Project is composed of three segments, namely segments 9,
10.1 and 10.2. The 2.4km Segment 9 will connect the NLEX to MacArthur Hi-Way and is expected
to be completed in 2Q14. The 5.7km Segment 10.1 will be completed in 2Q16, while the 8.2km
Segment 10.2 is expected to be operational in 2017. Once completed, this project will cut travel
time from the NLEX to Makati to only 20minutes from 2 hours currently. Assuming that the projects
will be completed as scheduled and barring any delays in obtaining toll rate tariff increases from the
government upon the completion of the projects, we expect the segment 9 to lead to an 8% increase
in traffic volume by in 2014E and a 2.4% increase in revenue per entry (excluding inflation tariff
adjustments). For the segment 10.1, we estimate that traffic volume will increase by 1% beginning
2016E, and that average revenue per entry will rise by 6.9%. Lastly, upon the completion of the
segment 10.2 in 2017, we expect the NLEX’s traffic volume to increase by 10% and average revenue
per entry to rise by 23%.

We increased our 5-year earnings forecast for MPI’s toll road business to a CAGR of 21.1% from
Php1.1Bil in 2013E to Php2.9Bil in 2018E. This is a significant jump compared to our previous
forecast wherein we only assumed that MPI’s earnings from the toll road business would grow by
a CAGR of only 12.4%. Given the added contribution of the NLEX Metro Expressway Link Project,
we believe that the toll road business will become the most valuable asset in MPI’s portfolio as the
earnings contribution of this segment will increase to 34.4% of MPI’s 2018E net income, up from
14.9% in 2013E. Given the increase in our earnings forecast, we are raising our NAV estimate for
the toll road business by 15.65% to Php56.3Bil, representing 38% of MPI’s NAV.

Exhibit 3: MPI sum-of-the-parts FV estimate

NAV (PhpMil) Change NAV/sh
Old New %
Maynilad 36,924 36,924 0.00 1.42

Tollways 48,706 56,327 15.65 2.16

Beacon 36,739 36,739 0.00 1.41

Healthcare 3,571 3,571 0.00 0.14

Landco 406 406 0.00 0.02

Less: net debt of parent -14,600 -14,067 -3.65 -0.54

NAV 140,945 148,033 5.03 5.69

Less: discount on toll roads (10%) 4,871 5,633 15.65 0.22
Less: discount on Beacon (10%) 3,674 3,674 0.00 0.14
Less: discount on Maynilad (20%) 7,385 7,385 0.00 0.28
Fair value 125,016 131,341 5.06 5.05

source: COL estimates

Thursday, 06 February 2014 MPI I COMPANY UPDATE page 3

 PHILIPPINE EQUITY RESEARCH

Investment Rating Definitions

BUY HOLD SELL

Stocks that have a BUY rating have attractive
fundamentals and valuations, based on
our analysis. We expect the share price
to outperform the market in the next six to
twelve months.
Stocks that have a HOLD rating have either We dislike both the valuations and
1.) attractive fundamentals but expensive fundamentals of stocks with a SELL rating.
valuations; 2.) attractive valuations but We expect the share price to underperform in
near term earnings outlook might be poor the next six to twelve months.
or vulnerable to numerous risks. Given the
said factors, the share price of the stock may
perform merely inline or underperform the
market in the next six to twelve months.

Important Disclaimers

Securities recommended, offered or sold by COL Financial Group, Inc.are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a
security. COL Financial ans/or its employees not involved in the preparation of this report may have investments in securities or derivatives of securities of
securities of the companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City, 1605 Philippines
Tel: +632 636-5411 Fax: +632 635-4632 Website: http://www.colfinancial.com

Thursday, 06 February 2014 MPI I COMPANY UPDATE page 4