Metro Pacific Investments Corporation MON 12 JUL 2021

Toll road demand weakened in April

with shift to ECQ, power demand
remained firm
Domestic toll road volume stalls in April but recovers in May. Following NCR’s shift to
enhanced community quarantine (ECQ) in April (and the subsequent shift to MECQ), the
BUY
recovery in MPI’s domestic toll road (NLEX, SCTEX, Cavitex) volume stalled to 358,000/day,
down from 476,000/day average during 1Q21. However, with the shift back to General TICKER: MPI
Community Quarantine in May (GCQ), toll road volume once again recovered to 451,000/
day. The May toll road volume is ~ 13% lower compared to pre-pandemic levels, although FAIR VALUE: 8.30
it is ~ 180% higher compared to the same period last year when the country was under CURRENT PRICE: 3.75
stricter community quarantine measures.
UPSIDE(%): 121.33
MER sales volume rises despite shift to ECQ. Despite NCR’s shift to ECQ in April, MER’s
total sales volume of MER increased to 3,788Gwh, 8.5% higher than the average monthly
volume during 1Q21, and 27% higher than April 2020 level. The April monthly volume also ABSOLUTE PERFORMANCE
brought MER’s sale volume to only ~ 5% below pre-pandemic level in April 2019. While
MER’s sales volume data for May is still not available, we believe that power consumption 1M 3M YTD
likely recovered further to near pre-pandemic level based on data from the Independent MPI -9.64 -7.41 -12.38
Electricity Market Operator of the Philippines (IEMOP).
PSEi -0.98 4.43 -4.27
Maynilad sales volume slightly lower compared to 2020 level. Based on the most recent
data available (as of end-May), Maynilad’s sales volume during the month was at 44MCM
(lower than the 45MCM during both pre-pandemic level in 2019 and May 2020).
MARKET DATA
LRT daily passenger volume declines 29% with shift to ECQ. The LRT-1’s average daily
ridership declined ~ 29% for the month of April and May from 1Q21 level due to the shift Market Cap 117,892.40Mil
to ECQ (and the subsequent shift to MECQ and GCQ). Compared to pre-pandemic average Outstanding Shares 31,437.97Mil
daily ridership of ~ 450,000, the current figure is still 79% below pre-pandemic level.
52 Wk Range 2.91- 4.58
Maintaining BUY rating on MPI. We have a buy rating on MPI with a FV estimate of 3Mo Ave Daily T/O 153.40Mil
Php8.30/sh. We are maintaining our BUY rating on MPI. We believe that while it is still
uncertain how the new concession agreement will impact the outlook and value of Maynilad,
investor sentiment on MPI could improve going forward as the new concession agreement
will ease uncertainties on Maynilad, as well as concerns on MPI’s other regulated core
businesses. Based on MPI’s current market price of Php3.75/sh, the company is trading
at a 60% discount to its NAV which implies that Maynilad and its toll road business are
already worthless. MPI is trading below its 46% stake in Meralco(equivalent to 147% of
MPI’s current market capitalization). Even if we assumed the worst-case scenario where
Maynilad would become worthless, capital appreciation potential based on MPI’s current
price is still 96% to Php7.35/sh.
FORECAST SUMMARY
Year to Dec. 31 2017 2018 2019 2020E 2021E 2022E
Sales 62,512.0 43,257.0 49,276.0 40,855.0 61,205.7 66,556.2
% change y/y 39.5 (30.8) 13.9 (17.1) 49.8 8.7
EBIT 29,057.0 28,866.0 30,761.0 21,334.0 28,110.3 31,241.9
% change y/y 20.1 (0.7) 6.6 (30.6) 31.8 11.1
EBIT Margin (%) 46.5 66.7 62.4 52.2 45.9 46.9
EBITDA 32,121.0 32,183.0 33,284.0 22,164.0 31,789.3 34,090.9
% change y/y 18.3 0.2 3.4 (33.4) 43.4 7.2
EBITDA Margin (%) 51.4 74.4 67.5 54.3 51.9 51.2
Net Profits 13,151.0 14,129.0 23,856.0 4,748.0 12,288.4 14,210.0
% change y/y 5.3 7.4 68.8 (80.1) 158.8 15.6
NPM (%) 21.0 32.7 48.4 11.6 20.1 21.4
EPS (Php) 0.418 0.449 0.759 0.151 0.391 0.452
% change y/y 5.3 7.4 68.8 (80.1) 158.8 15.6

RELATIVE VALUE
P/E(X) 9.0 8.3 4.9 24.8 9.6 8.3
P/BV(X) 0.7 0.7 0.6 0.6 0.6 0.6
George Ching
ROE(%) 8.2 8.2 12.5 2.6 6.3 6.9
Dividend yield (%) 2.7 2.9 2.9 2.9 2.9 2.9 Senior Research Manager
BVPS(P) 5.13 5.51 6.07 5.88 6.17 6.52 george.ching@colfinancial.com
*So urce: COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of the
COL Financial website as these may be subject to tampering or unauthorized alterations.
 FIELD NOTES I MPI: TOLL ROAD DEMAND WEAKENED IN APRIL WITH SHIFT TO ECQ,
POWER DEMAND REMAINED FIRM

MON 12 JUL 2021

Metro Pacific INCOME STATEMENT (IN PHPMIL)

Investments Revenues
2017
62,512
2018
43,257
2019
49,276
2020
40,855
2021E
61,206
2022E
66,556
Corporation (MPI) % Growth 39.5% -30.8% 13.9% -17.1% 49.8% 8.7%
EBIT 29,057 28,866 30,761 21,334 28,110 31,242
COMPANY BACKGROUND % Growth 20.1% -0.7% 6.6% -30.6% 31.8% 11.1%
EBITDA 32,121 32,183 33,284 22,164 31,789 34,091
Metro Pacific Investments Corporation % Growth 18.3% 0.2% 3.4% -33.4% 43.4% 7.2%
(MPI) is the Philippine investment arm of Interest Expense (7,372) (7,353) (7,986) (8,781) (6,727) (6,727)
Hong Kong-based First Pacific Company Other Income/Expense 11,036 11,275 (12,568) 5,329 8,034 8,767
Ltd. focused on the country’s infrastructure Pretax Income 24,676 22,246 (547) 10,545 20,987 24,140
Tax Expense (5,649) (5,375) (3,584) (3,728) (3,823) (4,477)
industry. MPI holds interest in companies
Net Income 13,151 14,129 23,856 4,748 12,288 14,210
engaged in water distribution, toll roads,
% Growth 5.3% 7.4% 68.8% -80.1% 158.8% 15.6%
power distribution and hospitals. EPS 0.42 0.45 0.76 0.15 0.39 0.45
% Growth 5.3% 7.4% 68.8% -80.1% 158.8% 15.6%
REVENUE BREAKDOWN
BALANCE SHEET (IN PHPMIL)

8% 2017 2018 2019 2020 2021E 2022E

Cash & Equivalents 53,364 52,942 79,708 50,674 60,260 72,800
8% Trade Receivables 10,899 12,495 14,624 8,228 8,228 8,228
20% Inventories 0 0 0 0 0 0
8%
20% 45% Other Current Assets 10,432 12,892 10,905 8,007 8,007 8,007
45% PPE 67,606 71,926 58,591 6,878 6,745 6,516
20% Other Non-Current Assets 361,200 406,441 447,950 468,040 472,607 476,816
45% Total Assets 503,751 557,946 611,778 617,796 631,816 648,335
Accounts Payable 27,142 31,951 36,363 35,172 35,172 35,172
27%
27% ST Debts 19,452 16,081 24,097 26,442 26,442 26,442
Other Current Liabilities 8,283 8,230 14,658 53,980 53,980 53,980
27% LT Debts 185,277 210,866 233,690 207,405 207,405 207,405
Other Non-Current Liabilities 47,918 51,815 56,925 50,450 50,450 50,450
Water Toll roads andHospital
others and others Others
OthersTotal
Water Toll roads Hospital Liabilities 288,072 318,943 365,733 373,449 373,449 373,449
Water Toll roads Hospital and others Others Total Equity 215,679 239,003 246,045 244,347 258,367 274,886
Total Liabilities & Equity 503,751 557,946 611,778 617,796 631,816 648,335

CASHFLOW STATEMENT (IN PHPMIL)

2017 2018 2019 2020 2021E 2022E
Net Income 13,151 14,129 23,856 4,748 12,288 14,210
Depreciation & Amortization 7,277 9,265 22,988 16,578 5,215 5,215
Other Non-Cash Exp (Gains) (2,406) 2,056 (19,501) 42,615 (10,953) (3,053)
Interest Expense (Income) 7,372 7,353 7,986 8,781 6,727 6,727
Decrease (Increase) in Working Cap 1,114 -807 5,691 -79 13,297 6,430
Operating Cash Flow 26,508 31,996 41,020 72,643 26,575 29,529
Capex -81,160 -51,867 -57,802 -50,613 -43,530 -40,590
Other Investments 68,312 26,426 34,342 81,289 29,685 26,745
Investing Cash Flow -12,848 -25,441 -23,460 30,676 -13,845 -13,845
Proceeds (Payment) Debts 26,682 23,576 36,326 0 0 0
Payment of Cash Dividends -3,144 -3,458 -3,458 -3,458 -3,458 -3,458
Others -11,818 -20,901 -23,824 -30,206 314 314
Financing Cash Flow 11,720 -783 9,044 -33,664 -3,144 -3,144
Change in Cash 25,380 5,772 26,604 69,655 9,586 12,540

COL Financial Group, Inc. 2

 FIELD NOTES I MPI: TOLL ROAD DEMAND WEAKENED IN APRIL WITH SHIFT TO ECQ,
POWER DEMAND REMAINED FIRM

MON 12 JUL 2021

INVESTMENT THESIS: KEY RATIOS

2017 2018 2019 2020 2021E 2022E
Major beneficiary of government’s PPP
GPM (%) - - -
initiatives
EBITDA Margin (%) 51.4% 74.4% 67.5% 54.3% 51.9% 51.2%
We believe that MPI would be one of the OPM (%) 46.5% 66.7% 62.4% 52.2% 45.9% 46.9%
biggest beneficiary of the government’s PPP NPM (%) 21.0% 32.7% 48.4% 11.6% 20.1% 21.4%
initiatives given its focus on infrastructure Times Interest Earned (X) 3.9 3.9 3.9 2.4 0.0 0
and strong financing capability. We Current Ratio (X) 1.4 1.4 1.4 1.2 0.0 0
believe that MPI’s expertise in operating Net D/E Ratio (X) 1.5 1.6 1.5 1.2 1.1 0.9
Days Receivable 63.6 105.4 108.3 73.5 49.1 45.1
infrastructure companies like MNTC,
Asset T/O (%) 12.41% 7.75% 8.05% 6.61% 9.69% 10.27%
Maynilad and Meralco will give it an edge in
ROAE (%) 3.07% 2.66% 4.08% 0.77% 1.97% 2.22%
participating in the PPP projects. It also has
an advantage in obtaining cheap financing
MAJOR CORPORATE DEVELOPMENTS (5-YEARS)
given it is an affiliate of First Pacific Ltd of
HK. Acquired PLDT's remaining 25% stake in Beacon for Php21.8Bil 06/01/2017

Maynilad: Huge underserved population Sold 4.2% stake in MER @Php250/sh. 06/01/2017
and favourable concession agreement
translate to attractive earnings growth Acquired PLDT's 25% stakein Beacon 05/01/2016
potential
Maynilad’s billed volume has huge growth Sold 3.6Bil shares to GT Capital (11.4% of expanded capital) 05/01/2016

potential given that it only serves 92%

Acquired 10% stake in MER from Beacon for Php26.5Bil 04/01/2015
of the population of its concession area.
Maynilad also benefits from a highly-
Raised Php8.8Bil via top up placement (1.8Bil common shares) 02/01/2015
favorable concession agreement wherein
it currently is allowed to increase tariffs
Acquired 5% stake in MER from Beacon at Php13.24Bil 06/01/2014
and earn a 7.89% after-tax return on
operating expenses, capital maintenance
Sold 40% of hospital business for Php11.2Bil 05/01/2014
and investment expenditures. It is also
protected against inflation and forex risk Sold via top up placement 1.33Bil common shares at PHp4.60/sh 01/01/2013
through annual inflation adjustments and
quarterly forex adjustments on its water
rates.

MER: Higher GDP growth to boost power

demand
MPI has an effective 46% stake in MER.
We like MER given that it will be the main
beneficiary of the country’s rising power
demand, resulting from the country’s
accelerating GDP growth Meralco believes
that there is a high correlation between
the country’s GDP growth and power
consumption.

COL Financial Group, Inc. 3

 FIELD NOTES I MPI: TOLL ROAD DEMAND WEAKENED IN APRIL WITH SHIFT TO ECQ,
POWER DEMAND REMAINED FIRM

MON 12 JUL 2021

Valuation NAV VALUATION

Methodology
Valuation
Value (PhpMil) Value (Php/Sh) % of GAV % of NAV Methodology
Maynilad 29,687 0.9 9.3% 10.1% DCF
Tollways 108,944 3.5 34.0% 36.9% DCF
Meralco/Beacon 172,898 5.5 53.9% 58.5% DCF
Healthcare 5,930 0.2 1.8% 2.0% P/E
LRT 3,198 0.1 1.0% 1.1% DCF
Total 320,657 10.2 100.0% 108.6%
Less: Net Debt 25,295 0.8
Equity Value 295,363 9.4
Less: Holding Company Discount 34,401 1.1
FV Estimate 260,962 8.30
so urce: COL estimates

COL Financial Group, Inc. 4

 FIELD NOTES I MPI: TOLL ROAD DEMAND WEAKENED IN APRIL WITH SHIFT TO ECQ,
POWER DEMAND REMAINED FIRM

MON 12 JUL 2021

I MP OR TA NT R AT ING DEFINITIONS
BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

I MP OR TA NT DISC L AIM ER
Securities recommended, offered or sold by COL Financial Group, Inc. 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 said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior 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. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

C O L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

SENIOR RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com

C O L F INANC IAL G R O UP, I NC.

24/F EAST TOWER, TEKTITE TOWERS,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 5