Investors dump shares of water firms
MWSS ruling seen detrimental to utilities’ profitabilityBy Doris C. Dumlao |Philippine Daily Inquirer
Investors dumped shares of water utility-related stocks Friday, weighing down the overall stock market, after regulators ordered the metropolis’ two private water concessionaires Manila Water Co. and Maynilad Water Services Inc. to cut water tariffs for the next five years.
MWC shares slid by 14.52 percent to close at P26.50 a share while Metro Pacific Investments Corp., the parent company of Maynilad, shed 6.38 percent to end at P4.40 a share as investors reassessed profit expectations on their water distribution businesses.
As these stocks are both part of the main-share Philippine Stock Exchange index, the local stock barometer slumped by 62.37 points or 1.01 percent to close at 6,133.24. The index ended in negative territory for the second session, likewise tracking profit-taking across regional markets.
Ayala Corp. (-0.89 percent), the parent firm of MWC, and another key investor in Maynilad, DMCI Holdings (-1.62 percent), likewise extended their decline from Thursday, the day when the MWSS’ ruling on rate rebasing came out.
“MWSS judgement is negative for both water utility concessionaires but is more substantial for Manila Water compared to Maynilad. The annual reduction for Manila Water is five times greater than that of Maynilad’s comparable rate reduction. Presumably this is because Maynilad Water has been operating under the rate-rebasing mechanism far longer than Maynilad, which was originally under the Lopez Group, and therefore benefited from the inclusion of corporate income tax in the tariff,” said Jose Mari Lacson, head of research at local stock brokerage Campos Lanuza & Co.