{"id":330470,"date":"2024-11-18T15:39:46","date_gmt":"2024-11-18T07:39:46","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=330470"},"modified":"2024-11-18T15:39:49","modified_gmt":"2024-11-18T07:39:49","slug":"stock-in-focus-manila-water-co-mwc-18-nov-2024-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-water-co-mwc-18-nov-2024-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Water Co. (MWC) – 18 Nov 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>18 Nov 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 33.12<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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We maintain our fondness for MWC, mainly due to its high earnings visibility and sound management. The predictability of its business, coupled with near-certain earnings growth from programmed rate rebasing, gives us greater conviction to issue a BUY rating on the stock despite macroeconomic uncertainties. <\/p>\n\n\n\n

Following its 9-months (9M) 2024 report, we are upgrading our Target Price (TP) for MWC from P26.10 to P33.12 based on: (1) rolling forward our valuation to use FY25E as base year, (2) revisions to our regulatory risk discount framework which lowered the RRD for MWC from the previous flat rate of 15.0% to 2.8%, and tempered by (3) 50% reduction in NEZ-INTL EPS, and (4) updating the value of investments in Saigon Water and EastWater. <\/p>\n\n\n\n

We are thus reinstating our BUY rating on MWC given the defensiveness of the business and the robust potential upside of 31.7% to our revised TP of P33.12.<\/p>\n\n\n\n

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

MWC continues to meet expectations<\/strong><\/p>\n\n\n\n

MWC\u2019s 9M 2024 earnings reached 77.4% of our 2024 forecast, marking a slight outperformance despite a seasonally weak quarter. Billed volume for both Manila East Zone (396.1 mcm, +2% YoY) and Non-East Zone Philippines (93.3 mcm, +6% YoY) were within expectations, with revenues for both EZ and NEZ-PH boosted by programmed tariff hikes in EZ, Boracay, Clark, and Laguna. Overall revenues were ever so slightly behind our forecasts, but this can be attributed to lower-than-expected \u201cother operating revenues\u201d which include cross-border billing with West Zone concessionaire Maynilad.<\/p>\n\n\n\n

Philippine subsidiaries were on point<\/strong><\/p>\n\n\n\n

The core EZ business booked a net income of P9.3-Billion in 9M24, just slightly behind our 2024 forecast of P13.2-Billion. Aside from the slightly lower-than-expected revenues mentioned above, costs for the segment were higher than expected on increased personnel costs, overhead, and depreciation attributable to new facilities. On the other hand, NEZ-PH which comprises of MWC operations in the Philippines outside its core franchise area, reported a 23% jump in revenue underpinned by 6% volume growth and 20% tariff increases. Aside from fresh contributions from newly-acquired concession areas in Laguna, revenues were boosted by higher billed volume from Boracay and higher sewer revenues from Laguna and Estate Water. As of 9M24, NEZ-PH\u2019s net income attributable to MWC stood at P908-Million or 74.9% of our 2024 forecast of P1.2-Billion.<\/p>\n\n\n\n

International business books net loss<\/strong><\/p>\n\n\n\n

MWC\u2019s international business reported a net loss of P19-Million in 9M 2024, a turn-around from the P155-Million net income recorded in the same period last year. One of the main reasons cited by the company is its problematic associate in Thailand, EastWater, which saw both a decline in revenues and higher costs of raw water. Higher operating expenses in Vietnam under Thu Duc and Kenh Dong added further pressure to NEZ-Intl\u2019s bottom line.<\/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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