{"id":326161,"date":"2023-12-20T12:07:45","date_gmt":"2023-12-20T04:07:45","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=326161"},"modified":"2023-12-20T14:07:38","modified_gmt":"2023-12-20T06:07:38","slug":"stock-in-focus-manila-electric-co-meralco-mer-20-dec-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-electric-co-meralco-mer-20-dec-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Manila Electric Co. – Meralco (MER) – 20 Dec 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>MER<\/td><\/tr>
Company Name<\/strong><\/td>Manila Electric Co. (Meralco)<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>20 Dec 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 432.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We set our target price for Manila Electric Company (MER) to Php432.00 using Discounted Cash Flow (DCF) valuation. Our valuation offers a potential share price upside of 12.2%. <\/p>\n\n\n\n

We also estimate MER\u2019s 2024 dividend yield at 5.2%. We believe the company will continue to grow on strong energy sales given the onset of El Ni\u00f1o and the continued improvement of its power generation business, led by PacificLight as it enjoys improved fuel margins in Singapore.<\/p>\n\n\n\n

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

Banking on renewable energy (RE) expansion<\/h3>\n\n\n\n

MER has started to reap the benefits of its power generation firm, Meralco PowerGen Corp. MGen) as its 58%-owned PacificLight recorded a Php13.4 billion in core net income, 50% higher y\/y from strong margins from newly secured contracts. Recall that, MGen committed to invest at least P18 billion to accelerate its renewable energy portfolio by adding 2GWs by 2030.<\/p>\n\n\n\n

MGreen to get 50.5% total voting interest in SPNEC<\/h3>\n\n\n\n

MGen Renewable Energy Inc. (MGreen) has entered into a subscription agreement with SP New Energy Corp. (SPNEC) for the subscription by MGREEN of 15.7 billion common shares and 19.4 billion preferred shares of SPNEC. Once the Php15.9 billion is closed upon fulfillment of certain conditions (increase in SPNEC\u2019s authorized capital stock and amendment of its articles of incorporation), MGreen will be the controlling shareholder of SPNEC with a total voting interest of 50.5%. This will boost MER\u2019s RE portfolio as SPNEC has over 10GWs of plants in its pipeline for development, which includes Terra Solar\u2019s 3,500MW solar plant and 4,000MW energy storage system slated for completion by 2026\/2027.<\/p>\n\n\n\n

9-month (9M) 2023 results<\/h3>\n\n\n\n

MER reported 9M 2023 core net income of Php30.0 billion, 53% higher y\/y, beating consensus estimates (accounting for 88%\/89%). Gross revenues grew 6% due to higher energy sales from the commercial and residential segments, higher pass-through charges, and a distribution rate following the completion of the ERC-ordered
refunds. MGen\u2019s contribution to MER\u2019s core net income grew to Php10.2 billion led by Pacific Light\u2019s robust performance from higher blended margins with secured contracts and higher spot market prices in Singapore.<\/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>