{"id":327052,"date":"2024-03-07T01:32:50","date_gmt":"2024-03-06T17:32:50","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327052"},"modified":"2024-03-07T01:32:52","modified_gmt":"2024-03-06T17:32:52","slug":"stock-in-focus-manila-water-co-mwc-7-march-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-water-co-mwc-7-march-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Water Co. (MWC) – 7 March 2024 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>7 March 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 23.79<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite the slight underperformance and the Thailand impairment, we still consider MWC our top utility and defensive pick. Management decisions in recent years have proven that the company can, to paraphrase Bruce Lee, be like water and adapt to changing situations. Further, with its tariff increase schedule until 2027 already approved by water regulators and its legislative franchise valid until 2047, we feel that the regulatory risk for MWC is much lower than other comparable companies. <\/p>\n\n\n\n

The company\u2019s latest dividend declaration of P1.129\/share is also much higher than our expected P0.619\/share and gives a decent yield of 5.8%. As such, we remain a BUY on MWC with a Target Price of P23.79, although this FV estimate could be subject to minor revisions once the full audited financial statement of the company is released.<\/p>\n\n\n\n

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

Thailand write-down hits MWC bottomline<\/h3>\n\n\n\n

MWC reported that net income for 2023 stood at P5.6-Billion after the company recognized a P4.1-Billion impairment adjustment on its investment in EastWater (Thailand). The impairment provision would result to a quarterly net loss of P1.7-Billion for 4Q 2023, from a net income of P1.4-Billion in 4Q 2022 and P2.2-Billion in 3Q 2023. Excluding this non-recurring line item from 2023 and non-recurring gains from 2022, net income would be up by 73.9% year-on-year (YoY) at P9.6-Billion for the year, while net income for the quarter would be P2.4-Billion. This is in-line with our forecast of P9.7-Billion net income for the year.<\/p>\n\n\n\n

East Zone concession area trailed forecasts<\/h3>\n\n\n\n

Total billed volume for MWC\u2019s Manila East Zone (EZ) concession area ended
the year at 516.4-Mn m3 , slightly behind our estimated 522.1-Mn m3 forecast. The average tariff of P44.8\/m3 also trailed our estimate of 45.5\/m3 due to a billed volume mix that is unfavorably skewed towards lower-priced residential accounts. However, our assumption of a continued shift towards commercial\/industrial consumption held true, with comm\/indu contribution to the revenue mix increasing to 41% from 39% last year. Consequently, EZ\u2019s 2023 net income of P8.8-Billion (+60.1% YoY) was 8.3% lower than our forecasted P9.6-Billion.<\/p>\n\n\n\n

Non-East Zone areas also performed less than expected<\/h3>\n\n\n\n

Philippine concession areas outside of Manila East Zone, such as Laguna, Boracay, and Clark among others, reported a consolidated net income of P750-Million, 15.4% lower than our forecasted P887-Million despite being 447% higher than the previous year. However, we expect continued improvements in the NEZ-PH segment as industrial activity in Laguna and Clark, as well as tourism activity in Boracay, continue to pick up.<\/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>