You are on page 1of 3

Company Report


DMCI Holdings: Brownfield enhances future growth potential

Company Update

SHARE DATA Semirara to put up 600MW plant. DMCI will be an indirect play on the tight power demand supply
Rating BUY situation in Luzon given plans of its 59% owned Semirara Mining to build a 600 MW coal-fired plant.
Ticker DMC The brownfield plant, which is expected to cost US$800 Mil, is scheduled for completion n FY13 and
Price Target (Php) 33.00 will increase the power generating capacity of Semirara by 214.7% to 1,070MW.
Current Price 27.50
Upside (%) 20.00 Although the brownfield project is still undergoing feasibility studies, we believe there is a strong
likelihood that the project will push through. There is an expected power shortage in FY11. The
expected power shortage would ensure the high utilization rate of the plant and attractive selling
price. Nevertheless, Semirara plans to enter into a strategic partnership with Meralco to reduce
merchant risk. It is also in talks with Marubeni, which it plans to tap as a source of low cost funding
for the project.
1M 3M YTD Based on the assumption that the new plant will operated at an average capacity of 85%, and
DMC 28.81 54.93 183.51
that average selling price would be Php4.80/KWh, DMCI’s 2013 profits would grow by Php1.6Bil or
11.8%, due to the new plant. (see exhibit 1)
PSEi 14.97 21.57 34.31
Raising FV estimate to Php33/sh and reiterating BUY. We are increasing our FV estimate by
26.4% from Php26.10/sh to Php33.00/sh. The increase in our FV estimate was largely due to the
30.0% increase in our NAV estimate for Semriara. We also rolled over our forecast to end FY11.

We reiterate our BUY rating on DMC given its strong earnings growth potential. The company
continues to climb the value chain by capitalizing on its core competency of construction and
entering into businesses with attractive earnings growth prospects. DMCI’s valuation is also
attractive. At its current price of Php27.80/sh, the stock is trading at only 7.3X FY11 P/E. This is
Market Cap 73,026.09 Mil
well below the 14.0X average FY11 P/E of the market and the 13.0X average FY11 P/E of local
Outstanding Shares 2,655.49 Mil conglomerates. Although DMCI’s P/E is in line with its historical average of 7.5X, we believe a re-
52 Wk Range (Php) 8.50 - 30.00 rating is warranted. Earnings are expected to grow by a CAGR of 30.5% until FY13, significantly
3 Mo Ave Daily T/O 157.71 Mil higher than its historical average earnings growth of 12.9%. (see exhibit 2)

Year to Dec. 31 2008 2009 2010 2011 2012
Sales 21,158 29,711 48,219 49,962 53,234
% change y/y 49.3 40.4 62.3 3.6 6.6
EBIT 2,255 3,850 7,718 10,511 11,584
% change y/y 15.8 70.7 100.4 36.2 10.2
EBIT Margin (%) 10.7 13.0 16.0 21.0 21.8
EBITDA 3,822 5,343 10,378 13,429 14,651
% change y/y -0.8 39.8 94.2 29.4 9.1
EBITDA Margin (%) 18.1 18.0 21.5 26.9 27.5
Net Profits 1,688 4,683 7,469 10,041 11,597
% change y/y -25.8 177.4 59.5 34.4 15.5
NPM (%) 8.0 15.8 15.5 20.1 21.8
EPS (cents) 0.64 1.76 2.81 3.78 4.37
% change y/y -31.9 175.0 59.8 34.4 15.5

P/E(X) 43.0 15.6 9.8 7.3 6.3
P/BV(X) 4.4 3.6 2.7 2.1 1.6
RESEARCH CONTACT ROE(%) 9.1 20.0 24.2 23.9 21.1
Paul Jeffrey Lu Dividend yield(%) 0.4 0.7 1.8 1.8 1.8 *Source: CitisecOnline estimates

Exhibit 1: Calaca Expansion Key Assumptions

Effective Capacity 600MW
Estimated Cost US$800Mil
Ownership 50%
Average Utilization 85%
Contracted Price Php4.80/KWh
Source: COL estimates

Exhibit 2: Sum Of The Parts Valuation

Subsidiary/Investment Interest Total Value Effective Value NAV/sh
Maynilad 42% 86,940 36,515 13.75
Semirara 59% 69,977 41,286 15.55
Construction 100% 16,991 16,991 6.40
DMCI Homes 100% 12,663 12,663 4.77
186,570 107,455
Net Debt (4,449) (1.68)
Total NAV 103,006 38.79
Holding Company Discount (15,560) (5.86)
Discounted NAV 87,445 32.93
Source: COL estimates

DMC/Company Update/ page 2

Please see the Important Disclosures Section and Ratings Key at the end of this report.



Over the next six to twelve Over the next six to twelve Over the next six to twelve
months, we expect the share months, we expect the share months, we expect the share
price to increase by 15% or price move within a range of price to decline by more
more. +/- 15%. than 15%.


A stock that is included in our “Top Pick” list has to meet the following criteria: 1.) It must belong to a sector with neutral to positive outlook; 2.) It must
have double digit earnings growth for the current and the succeeding fiscal year; 3.) Its share price appreciation potential must be above 15% as of the
date it was included in the list; and 4.) It must have an upward intermediate term trend.

Securities recommended, offered or sold by CitisecOnline are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and it may be
incomplete or condensed. All opinions and estimates constitute the judgment of CitisecOnline’s Equity Research Department as of the date of the report
and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or
sale of a security. CitisecOnline and/or its employees not involved in the preparation of this report may have investments in securities or derivatives of
securities of companies mentioned in this report, and may trade them in ways different from those discussed in this report.

2401-B East Tower, Philippine Stock Exchange Center Exchange Road, Ortigas Center, Pasig City 1605 Philippines
Voice: +632 636 54 11 to 20 Fax: +632 635 4632 Internet:
DMC/Company Update/ page 3