MANILA, Philippines—Lopez Holdings Corp. chalked up a net income of P3.9 billion in 2011, about a third of the bottomline in the previous year when it booked hefty one-time gains from the sale of additional shares in Manila Electric Co. by its affiliate First Philippine Holdings Corp.
FPH, for its part, booked P2.1 billion in net profit last year compared to the P24.85 billion bottomline in 2010, when it generated P23.56 billion from the sale of additional shares in Meralco to the group of businessman Manuel V. Pangilinan.
In 2010, the comparative net income attributable to parent equity holders of Lopez amounted to P13.2 billion.
AB Capital Securities recently initiated coverage of FPH with a “buy” rating and a target price of P85.75 per share for FPH based on “sum of the parts” net asset valuation, which values a company by estimating how much its units will be worth if spun off or acquired by another company.
“FPH is a holding company with a focus on the less cyclical electric power industry. We think that FPH’s modest growth performance and favorable cash levels make fundamentals attractive,” AB Capital Securities analyst Gregg Adrian Ilag said in a research analysis dated March 8.
In AB Capital’s view, FPH is a cheaper way of gaining exposure to several companies – First Gen Corp., Meralco and Energy Development Corp.
“Opportunities arising from the electric power industry remain sound, the Philippines needs an additional 16,550 megawatts over the next 18 years to avoid a shortfall in power generation. Out of these, only 1,354 MW were committed and 4,215MW were indicative. In our view, the capacity shortfall on top of the current industry sources of energy (66 percent of installed capacity are fossil fuels) puts strong upward pressure on electricity prices. We also think that the shortfall presents opportunities for expansions of power generation companies,” Ilag said.
Lopez, formerly Benpres Holdings Corp., is the holding company for the Lopez family’s various investments. Through its subsidiaries and affiliates, it has businesses in media (ABS-CBN Corp.), telecommunications (Bayan Telecommunications, Inc.), power generation and distribution (FPH) and cable television (Sky Cable Corp).