Semirara Mining Corporation WED 03 NOV 2021

9M21 net income exceed estimates

SCC’s 9M21 earnings rose 244% y/y to Php10.3Bil, above COL forecasts (95%) and consensus
forecast (87%). The sharp rise in earnings was mainly driven by the coal mining segment’s
profits. Revenues from the coal mining segment increased 106.4% to Php29.8Bil, representing
BUY
97.4% of our full year forecast. Meanwhile, power generation revenue rose by 25.1% to TICKER: SCC
Php11.1Bil, representing 74.5% of our full year forecast. Earnings beat estimates due to the FAIR VALUE: 35.20
coal business’ better than expected earnings. CURRENT PRICE: 24.00
UPSIDE: 46.67
Coal business earnings beat forecast on higher sales volume and ASP. Coal mining
revenues in 9M21 rose 106.4% y/y to Php29.8Bil, equivalent to 97.4% of our full year
forecast. Sales volume for the period rose 51% to 12.7Mil MT (representing 98% of our full ABSOLUTE PERFORMANCE
year forecast). Export sales rose 90% to 8Mil MT, while sales volume to local customers rose
1M 3M YTD
12% to 4.7Mil MT. SCC’s average selling price for coal rose 38% to Php2,351/MT, in line
SCC 7.62 46.88 74.17
with our ASP forecast for the year. Operating cost rose 86% to Php20.9Bil, representing
PSEi 2.63 10.23 -0.47
95% of our full year forecast. As a result, the coal segment’s net income amounted to
Php9.2Bil(+244% y/y), exceeding forecast, representing 106% of our full year forecast.

SCPC unit 2 extended outage drags results. 9M21 revenue from Calaca units 1 and 2 MARKET DATA
(SCPC) declined 6.8% to Php5.5Bil, representing only 62% of our full year forecast. This was Market Cap 102,267.50Mil
mainly due the unplanned outage of unit 2 since December 2020. Energy sales declined 39% Outstanding Shares 4,250.55MIl
to 1,306Gwh (55% of full year forecast), while average selling price rose 53% to Php4.24/ 52 Wk Range 10.70 - 30.80
kwh (13% higher than forecast). Meanwhile, operating cost declined by 4.3% to Php5.1Bil, 3Mo Ave Daily T/O 58.28Mil
equivalent to 76% of our full year forecast. As a result, SCPC posted a net loss of Php44Mil
during 9M21 (full year net income forecast of Php1.3Bil).

FORECAST SUMMARY
Year to Dec. 31 2017 2018 2019 2020 2021E 2022E
Sales 43,943 41,969 44,252 37,041 48,472 46,790
% change y/y 20.1 -4.5 5.4 -16.3 30.9 -3.5
EBIT 15,403 13,349 10,240 7,130 14,943 15,286
% change y/y 19.5 -13.3 -23.3 -30.4 109.6 2.3
EBIT Margin (%) 35.1 31.8 23.1 19.3 30.8 32.7
EBITDA 22,242 22,017 17,633 12,882 20,955 21,556
% change y/y 29.3 -1.0 -19.9 -26.9 62.7 2.9
EBITDA Margin (%) 50.6 52.5 39.8 34.8 43.2 46.1
Net Profits 14,209 12,025 9,679 4,764 13,284 11,935
% change y/y 18.0 -15.4 -19.5 -50.8 178.8 -10.2
NPM (%) 32.3 28.7 21.9 12.9 27.4 25.5
EPS (cents) 3.33 2.82 2.27 1.12 3.12 2.80
% change y/y 18.0 -15.4 -19.5 -50.8 178.8 -10.2

RELATIVE VALUE
P/E(X) 7.2 8.5 10.6 21.5 7.7 8.6
P/BV(X) 2.7 2.6 2.3 2.2 1.9 1.7 George Ching
ROE(%) 39.5 31.0 23.0 10.5 26.6 21.2 Senior Research Manager
Dividend yield(%) 8.3 9.4 4.7 5.2 6.5 5.8 george.ching@colfinancial.com
*So urce: COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

9M21 net income exceed estimates

SCC’s 3Q21 earnings increased 435% to Php4Bil. This brought 9M21 earnings to
Php10.3Bil, up 244% y/y, above COL forecasts (95%) and consensus forecast (87%). The
sharp rise in earnings was mainly driven by the coal mining segment’s profits. Total
revenues during 9M21 before eliminations rose 75.5% y/y to Php40.8Bil, higher than
forecasts (89.9% of COL full year forecast). Revenues from the coal mining segment
increased 106.4% to Php29.8Bil, representing 97.4% of our full year forecast. Meanwhile,
power generation revenue rose by 25.1% to Php11.1Bil, representing 74.5% of our full
year forecast. Earnings beat estimates due to the coal business’ better than expected
earnings.

Exhibit 1: SCC 3Q21 Results Summary

% of COL
in PhpMil 3Q20 3Q21 %Change 9M21
FY forecast
Revenue (gross) 8,380 15,099 80.2 40,844 89.9
Coal (gross) 4,188 10,877 159.7 29,765 97.4
Power (gross) 4,125 4,222 2.4 11,079 74.5
Operating income 1,093 4,170 281.5 11,119 89.0
Operating Margin (%) 13.0 27.6 14.6 27.2 N/A
Net Income 750 4,012 434.9 10,294 95.3
Net Margin (%) 8.9 26.6 17.6 25.2 N/A

source: SCC, COL estimates

Coal business earnings beat forecast on higher sales volume

and ASP

Coal mining revenues in 9M21 rose 106.4% y/y to Php29.8Bil, equivalent to 97.4% of our
full year forecast. Sales volume for the period rose 51% to 12.7Mil MT (representing 98%
of our full year forecast). SCC’s coal sales volume grew despite a 1% decline in production
as 3Q21 production was hampered by unfavorable weather conditions during the quarter.
The increase in coal sales volume was due to the increase in overall coal demand, and
as coal supply in China tightened due to the ongoing Australian coal import ban, and as
coal production was disrupted in coal exporting countries due to Covid-19 and weather
disturbances. Meanwhile, coal demand in Europe also rose significantly in the recent
months due to the lower than expected output of renewable energy power generation
and rising natural gas prices. This resulted to a 90% surge in export sales to 8Mil MT,
while sales volume to local customers rose 12% to 4.7Mil MT. SCC’s average selling price

COL Financial Group, Inc. 2

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

for coal rose 38% to Php2,351/MT, in line with our ASP forecast for the year. Operating
cost rose 86% to Php20.9Bil, representing 95% of our full year forecast. As a result, the
coal segment’s net income amounted to Php9.2Bil(+244% y/y), exceeding forecast,
representing 106% of our full year forecast. Given higher than expected coal sales volume
in 9M21 and management guidance that coal production will likely recover in 4Q21, we
increased our sales volume forecast by 7.7% to 14Mil MT for FY21. We are also raising
our FY21 ASP forecast by 2.1% to Php2,400/MT in light of management’s outlook that
coal pricing will be higher in 4Q21 compared to the 9M21 ASP. This increased our net
income forecast for the coal mining business by 29% to Php11.2Bil.

SCPC unit 2 extended outage drags results

9M21 revenue from Calaca units 1 and 2 (SCPC) declined 6.8% to Php5.5Bil, representing
only 62% of our full year forecast. This was mainly due the unplanned outage of unit 2
since December 2020. Energy sales declined 39% to 1,306Gwh (55% of full year forecast),
while average selling price rose 53% to Php4.24/kwh (13% higher than forecast). SCPC
sold 19% of its output to the spot market at an average price of Php4.92/kwh (100%
higher y/y). Meanwhile, operating cost declined by 4.3% to Php5.1Bil, equivalent to 76%
of our full year forecast. As a result, SCPC posted a net loss of Php44Mil during 9M21
(full year net income forecast of Php1.3Bil). While the performance of SCPC is expected
to improve beginning 4Q21 as Calaca unit 2 returns to operation, the unit is expected to
be needing additional repairs and will only be fully operational by early 2022.

SLPGC earnings above forecast on higher than expected

output and selling price

Revenues generated by the Calaca unit 3 and 4 (SLPGC) rose 90.2% to Php5.5Bil,
representing 93% of our full year forecast. Total volume sold increased 51% to 1,509Gwh
mainly due to better plant availability as unplanned outage hours declined. 9M21 sales
volume represents 82% of our full year forecast. Average selling price rose 26% to
Php3.67/kwh (14% higher than forecast) mainly due to better WESM prices (+134% to
Php5.7/kwh). 16% was output was sold to the WESM. Cost of power generation rose 42%
to Php4.3Bil, representing 102% of our full year forecast. As a result, SLPGC posted a net
income of Php1.08Bil during 9M21, representing 134% of our full year forecast.

COL Financial Group, Inc. 3

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

Maintaining BUY rating

In light of the increase in our earnings forecast for the coal mining business, we are
raising our FY21 earnings estimate for SCC by 23% to Php13.3Bil. We are also raising our
FV estimate on SCC by 1.9% to Php35.2/sh. We are maintaining our BUY rating on SCC.
We like SCC given that we believe that earnings have bottomed out in 2020(with 9M21
earnings increasing by 244% y/y following a 66% decline in 2020 due to the impact of
the Covid-19 pandemic). Despite the 74% increase in SCC’s share price in the YTD period,
the stock is still extremely cheap. It is trading at 8.6X FY22 P/E. compared to 17X FY22E
P/E of domestic peers and its 10 year historical P/E of 11.6X. Even At our Php35.2/sh FV
estimate, SCC is trading at 2022 P/E of 12.6X, nearly at par with its historical P/E. Based
on its actual 2021 cash dividend of Php3/sh, this provides a very high dividend yield of
11.5%. Upside to our FV estimate is also very high at 46.6%.

COL Financial Group, Inc. 4

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

Semirara Mining INCOME STATEMENT (IN PHPMIL)

Corporation (SCC) Revenues

2017
43,943
2018
41,969
2019
44,252
2020
37,041
2021E
48,472
2022E
46,790
% Growth 20.1% -4.5% 5.4% -16.3% 30.9% -3.5%
COMPANY BACKGROUND
EBIT 15,403 13,349 10,240 7,130 14,943 15,286
Semirara Mining Corp. is a vertically- % Growth 19.5% -13.3% -23.3% -30.4% 109.6% 2.3%
integrated power generation company, EBITDA 22,242 22,017 17,633 12,882 20,955 21,556
engaged in both coal mining and power % Growth 29.3% -1.0% -19.9% -26.9% 62.7% 2.9%
Interest Expense (622) (814) (1,034) (1,188) (1,188) (1,188)
generation. The company owns the right
Other Income/Expense 683 220 178 205 205 205
to mine the coal resources of Semirara Pretax Income 15,464 12,755 9,384 6,148 13,961 14,303
Island in Caluya, Antique, until July 14, Tax Expense 1,255 730 (295) 1,384 677 2,368
2027, through its Coal Operating Contract Net Income 14,209 12,025 9,679 4,764 13,284 11,935
with the Department of Energy (DOE). In % Growth 18.0% -15.4% -19.5% -50.8% 178.8% -10.2%
2016, the company produced 12Mil MT EPS 3.33 2.82 2.27 1.12 3.12 2.80
of coal, representing more than 90% of % Growth 18.0% -15.4% -19.5% -50.8% 178.8% -10.2%

the country’s total coal production. In BALANCE SHEET (IN PHPMIL)

December 2009, Semirara evolved into 2017 2018 2019 2020 2021E 2022E
a vertically-integrated power generation Cash & Equivalents 8,471 1,903 6,457 23,645 30,674 39,491
company following its acquisition of the Trade Receivables 6,475 7,301 3,642 5,150 6,739 6,505
Calaca coal-fired plant. It currently has a Inventories 5,914 12,363 10,220 3,632 3,898 3,764
total power generation capacity of 850MW. Other Current Assets 3,474 4,172 1,285 1,475 1,931 1,864
PPE 43,014 43,520 47,631 45,479 43,068 40,397
Other Non-Current Assets 1,249 1,790 2,975 1,016 1,329 1,283
Total Assets 68,596 71,049 72,209 80,396 87,639 93,304
REVENUE BREAKDOWN
Accounts Payable 10,851 9,946 8,451 8,180 8,780 8,478
ST Debts 3,556 10,426 5,529 5,529 5,529 5,529
Other Current Liabilities - - 14 14 14 14
LT Debts 14,469 10,043 13,068 19,144 19,144 19,144
39.4% Other Non-Current Liabilities 2,041 701 911 911 911 911
39.4% Total Liabilities 30,917 31,116 27,973 33,778 34,379 34,077
Total Equity 37,679 39,933 44,236 46,618 53,260 59,227
59% Total Liabilities & Equity 68,596 71,049 72,209 80,396 87,639 93,304
59% BVPS 8.8 9.4 10.4 10.9 12.5 13.9

CASHFLOW STATEMENT (IN PHPMIL)

2017 2018 2019 2020 2021E 2022E
Net Income 14,209 12,025 9,679 4,764 13,284 11,935
Mining Power
Depreciation & Amortization 6,839 8,669 7,392 5,752 - -
Mining Power
Other Non-Cash Exp (Gains) 273 526 652 1,188 7,199 7,458
Interest Expense (Income) -622 -814 -1,034 -1,188 -1,188 -1,188
Decrease (Increase) in Working Cap -2,492 -10,903 7,449 4,618 -1,710 133
Operating Cash Flow 18,207 9,503 24,138 15,134 17,584 18,338
Capex -6,314 -9,528 -11,634 -3,600 -3,600 -3,600
Other Investments -968 956 -741 1,960 -313 46
Investing Cash Flow -7,282 -8,572 -12,375 -1,640 -3,913 -3,554
Proceeds (Payment) Debts 1,312 2,333 -1,923 6,077 0 0
Payment of Cash Dividends -10,652 -9,571 -5,313 -2,382 -6,642 -5,967
Others -100 -252 -12 0 0 0
Financing Cash Flow -9,440 -7,490 -7,248 3,695 -6,642 -5,967
Change in Cash 1,485 -6,559 4,515 17,188 7,029 8,817

COL Financial Group, Inc. 5

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

INVESTMENT THESIS: KEY RATIOS

Cheapest power play in the sector 2017 2018 2019 2020 2021E 2022E
Despite the very challenging earnings GPM (%) 53.7% 50.3% 39.8% 34.4% 46.2% 46.2%
outlook of the company, we believe that EBITDA Margin (%) 50.6% 52.5% 39.8% 34.8% 43.2% 46.1%
OPM (%) 35.1% 31.8% 23.1% 19.3% 30.8% 32.7%
much of the negative news is already
NPM (%) 32.3% 28.7% 21.9% 12.9% 27.4% 25.5%
priced-in. The stock is the cheapest among
Times Interest Earned (X) 24.8 16.4 9.9 6.0 12.6 12.9
all power companies, trading at only 6.2X Current Ratio (X) 1.69 1.26 1.55 2.47 3.02 3.69
21E P/E based on our revised earnings Net D/E Ratio (X) 0.25 0.46 0.27 0.02 -0.11 -0.25
forecast. Days Receivable 53.8 63.5 30.0 50.7 50.7 50.7
Asset T/O (%) 64.1% 59.1% 61.3% 46.1% 55.3% 50.1%
Vertical integration a key advantage ROAE (%) 21.2% 17.2% 13.5% 6.2% 15.8% 13.2%

over competitors
The Calaca plant sources coal from
Semirara’s existing mining operations,
allowing it to save on fuel cost compared to
its peers. Furthermore, SCC will enjoy even
higher cost savings from Calaca unit 3 and
4 due to their abilities to utilize waste coal
in generating power.

COL Financial Group, Inc. 6

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

Valuation NAV VALUATION

Methodology Value (PhpMil)

Valuation
Value (Php/Sh) % of GAV % of NAV Methodology
Mining 56,125 13.17 38.3% 37.4% DCF
Calaca 66,255 15.55 45.2% 44.2% DCF
Calaca expansion phase 1 and 2 24,335 5.71 16.6% 16.2% DCF
Total 146,715 34.43 100.0% 97.8%
Less: Net Debt -3,240 -0.76
Equity Value 149,955 35.19
Less: Holding Company Discount 0 0.00
FV Estimate 149,955 35.19
Source: COL estimates

COL Financial Group, Inc. 7

 EARNINGS ANALYSIS I SCC: 9M21 NET INCOME EXCEED ESTIMATES

WED 03 NOV 2021

I MP OR TA NT R AT ING DEFINITIONS
BUY
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 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

I MP OR TA NT DISC L AIM ER
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 said information 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 prior 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 and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

C O L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

FIRST VICE PRESIDENT & CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN DENISE JOAQUIN

SENIOR RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com denise.joaquin@colfinancial.com

C O L F INANC IAL G R O UP, I NC.

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EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 8