Robust power sector
Another market sector that may benefit most from the current administration’s development thrusts and, therefore, would likely generate good investment returns is the power sector.
Power generation capacity was enough to meet demand requirements in the 1980s up to the early 1990s, data showed. By 2000, however, power generation capacity started to slow down but demand grew and expanded.
The current Philippine power situation is not necessarily the result of a slowdown in economic growth, but rather a soured implementation of the Electric Power Industry Reform Act (Epira) of 2001, which was precisely intended to boost and efficiently manage the generation of power.
Critics observe that to commence a power plant construction, it takes “nearly 200 different permits and signatures” from different agencies, not to mention “these takes over a period of two to five years to get.” Electricity rates are also very expensive here.
The present administration’s plan to cut bureaucratic red tape is expected to help unleash the country’s power generating capacity.
Major players
San Miguel Corp. (SMC) is currently the biggest power producer, accounting for 22 percent of the total power sold to the grid. As of today, it has 2,545 megawatts (MW) of owned and partly owned generating capacity or “attributable capacity.”
Per a Wall Street Journal report, key market data as of July 15, 2016 for SMC are: P/E ratio (Trailing Twelve Months or TTM), 16.39x; earnings per share or EPS (TTM), P4.76; market cap, P213.09 billion; shares outstanding, 2.38 billion; public float, 405.43 million; yield as of July 15, 2016, 1.79 percent; latest dividend P0.35; ex-dividend date, June 28, 2016.
The Aboitiz Group accounts for 20 percent of total power sold to the grid at 2,350 MW, making it the second biggest power generator.
The Aboitiz Group conducts its businesses through listed companies Aboitiz Equity Ventures, Inc. (AEV) and Aboitiz Power Corporation.
Per a Wall Street Journal report, key market data for AEV as of July 15, 2016 are: P/E ratio (TTM), 23.83x; EPS (TTM), P3.36; market cap, P445.24 billion; shares outstanding, 5.56 billion; public float, 1.55 billion; yield as of July 15, 2016, 1.33 percent; latest dividend P0.35 (April 19, 2016); ex-dividend date, March 17, 2016.
Data for Aboitiz Power as of July 15, 2016: P/E ratio (TTM), 18.23; EPS (TTM), P2.49; market cap, P334.08 billion; shares outstanding, 7.36 billion; public float, 1.539 billion; yield as of July 15, 2016, 2.64 percent; latest dividend P0.46 (April 19, 2016); ex-dividend date, March 17, 2016.
The third major player is the Lopez Group, long known to be in the power business. It accounts for 18 percent of total power sold to the grid at 2,150 MW.
Per Wall Street Journal report, key market data for EDC as of July 15, 2016 are: P/E ratio (TTM), 12.86x; EPS (TTM), P0.45; market cap, P107.74 billion; shares outstanding, 18.74 billion; public float, 9.26 billion; yield as of July 15, 2016, 2.43 percent; latest dividend P0.14 (April 12, 2016); ex-dividend date, March 18, 2016.
Global Power Corp. (GTCAP) of Metrobank’s George Ty is another major player, albeit a new entrant in the industry.
Another new entrant is Sem-Calaca Power Corp. of the Consunji group, operating under listed holding company DMCI Holdings, Inc. (DMC).
Bottom line spin
Coal remains as the country’s main energy source at 30.4 percent of total. This is followed by hydro at 21.6 percent, diesel at 18.5 percent, natural gas at 17.7 percent and geothermal at 11 percent.
Visayas relies more on geothermal plants at 41 percent while over half of Mindanao’s power supply is derived from hydro plants. Take your pick.
(You may reach the Market Rider at [email protected], [email protected] or at www.kapitaltek.com.)
