{"id":331705,"date":"2025-02-28T01:00:27","date_gmt":"2025-02-27T17:00:27","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=331705"},"modified":"2025-02-28T01:02:22","modified_gmt":"2025-02-27T17:02:22","slug":"stock-in-focus-manila-water-co-mwc-28-feb-2025-by-ap-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-manila-water-co-mwc-28-feb-2025-by-ap-securities\/","title":{"rendered":"Stock in Focus: Manila Water Co. (MWC) – 28 Feb 2025 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>28 Feb 2025<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 33.85<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Despite the challenges faced by some MWC units outside its core East Zone (EZ) franchise area, we note that EZ continues to account for 82.4% of MWC\u2019s consolidated net income. Even if impairment charges are excluded, EZ still accounts for 82.0% of earnings. With this in mind, we remain bullish on MWC due to the stability and high earnings visibility of its core business, along with impressive growth of its NEZ-PH business. <\/p>\n\n\n\n

Along with its earnings, MWC also declared dividends amounting to P1.841\/share which translates to a dividend yield of 6.14% at the last traded price of P30.00. The defensive nature of MWC\u2019s business, along with the company\u2019s generous dividend payouts, are the main reasons why we maintain our BUY rating with a TP of P33.85.<\/p>\n\n\n\n

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

MWC net income hit by another impairment charge on EastWater<\/strong><\/p>\n\n\n\n

MWC reported a net income of P10.5-Billion in 2024 due to another P3.6-Billion impairment charge on the company\u2019s investment in EastWater (Thailand) and an additional impairment of P902.0-Million on its investment in Saigon Water (Vietnam). These impairments are somewhat offset one-time gains of P471.0-Million from Saigon Water\u2019s divestment from Tan Hiep Water and P894-Million from MWC\u2019s divestment from Bulacan. Excluding these charges, core earnings for the year would have been P14.2-Billion, beating our estimate of P13.0-Billion and consensus estimates of P12.0-Bn. On the other hand, MWC\u2019s FY24 EBITDA of P25.9-Billion was slightly below our estimates of P26.6-Billion but higher than consensus estimate of P24.6-Billion.<\/p>\n\n\n\n

Result of operations<\/strong><\/p>\n\n\n\n

MWC generated P34.9-Billion in revenues in 2024, missing our estimate of P38.6-Billion. We attribute this mostly to lower-than-expected billed volume from MWC\u2019s core business in Manila East Zone (523.7 mcm vs our estimate of 539.7 mcm) and our overly optimistic assumption for average tariffs in Non-East Zone areas. However, both cost of services and operating expenses were in-line with our forecasts, while the company\u2019s net interest expense of P3.2-Billion was much lower than our forecast of P4.1-Billion on less-than-expected increase in average cost of debt. The lower-than-expected interest expenses, along with forex gains of P1.1-Billion contributed to MWC\u2019s earnings beat.<\/p>\n\n\n\n

Update on new acquisitions and international business<\/strong><\/p>\n\n\n\n

In April 2024, MWC acquired a majority stake in Laguna Water District (LARC). From the date of acquisition until end of 2024, LARC contributed P221.9-Million in revenues and P8.9-Million in operating losses. On the international business side, EastWater in Thailand continued to incur net losses due to the problems in the concession area, while Thu Duc, Kenh Dong and Saigon Water in Vietnam saw declining profitability. On top of these, the market value of EastWater and Saigon Water (which are publicly-traded companies) are already significantly below their respective book values.<\/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>