{"id":325004,"date":"2023-09-21T02:04:34","date_gmt":"2023-09-20T18:04:34","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325004"},"modified":"2023-09-21T02:04:36","modified_gmt":"2023-09-20T18:04:36","slug":"stock-in-focus-manila-water-co-mwc-21-sept-2023-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-water-co-mwc-21-sept-2023-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Water Co. (MWC) – 21 Sept 2023 by AP Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>MWC<\/td><\/tr>
Company Name<\/strong><\/td>Manila Water Company Inc.<\/td><\/tr>
Broker<\/strong><\/td>AP Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>21 Sept 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 26.13<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Given that MWC is now controlled by ports and casino magnate Ricky Razon, a business figure with an uncanny ability to close deals with regulators, approval of the extension is virtually a given at this point. The longer revenue runway for MWC, on top of our optimism over the company\u2019s domestic and international expansion, would underscore our BUY rating on the company based on consensus Target Price of P26.13 per share. <\/p>\n\n\n\n

We recognize that MWC\u2019s share price has been experiencing weakness on concerns about the company\u2019s surging debt load and rising interest expenses, coupled with weak return-on-equity. However, we recommend that long- term investors take advantage of the weakness to accumulate MWC.<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

MWC files for extension of RCA to 2047<\/strong><\/p>\n\n\n\n

On August 25, MWC filed for an application to extend the effectivity of its revised concession agreement (RCA) with MWSS from July 31, 2037 to July 31, 2047. In a position paper posted on MWC\u2019s website on Monday, the company rationalized its application by saying that given the forecasted population growth in its covered concession area would require significant investments in infrastructure to fulfill the increase in demand while complying with regulatory standards. <\/p>\n\n\n\n

The company said that extending the RCA give the company a longer timeframe to recover its expenditures and result in lower water tariffs for consumers. An alternative to higher tariffs would be for the government to compensate MWC for its unrecovered expenses in line with the concession agreement. As such, extending the RCA would be the least-cost option for both the government and consumers.<\/p>\n\n\n\n

Doubling down with a P1.15-Trillion pledge<\/strong><\/p>\n\n\n\n

In exchange for the extension of its RCA, MWC committed to increase its capital expenditures by 20.2%, operating expenses by 120.7%, and concession fees paid to the government by 14.3%. In total, MWC\u2019s expenditures will increase by 70.5% from P674-Billion to P1,149-Billion.<\/p>\n\n\n\n

Longer revenue stream to recover expenses<\/strong><\/p>\n\n\n\n

Based on numbers provided by MWC in the position paper, the RCA extension would result to an 18.0% reduction in tariffs from P66.60\/cu.m. if the concession agreement expires in 2037 to P54.63\/cu.m. if extended to 2047. Obviously, MWC is not getting nothing out this deal. <\/p>\n\n\n\n

Based on a study commissioned by MWSS in 2021, demand in MWC\u2019s East Zone concession would reach 2,062 million liters\/day (MLD) by 2037 and 2,765 MLD by 2047. This translates to annual billed volumes of 732 million cubic meters (MCM) by 2037 and 1,009 MCM by 2047. <\/p>\n\n\n\n

The RCA extension, if approved, would mean an additional P479-Billion in revenues for MWC or around P48-Billion per year from 2038-2047. That would be 89.4% higher than our 2023 forecasted water revenues for MWC.<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>