Metro Pacific Investments Corp. (MPI) FY2019 Financial Results

php-ph (45)in #philippines • 4 years ago (edited)

Earnings of MPI up by a fourth in the fiscal year 2019 compared to a year ago.

The diversified conglomerate net income increased 25.44% to ₱27.82 billion compared to ₱22.18 billion in 2018 with the flattish growth in revenues at 6.18% to P80.16 billion.

The MPI Healthcare system contributed 2,838% of MPI’s net income due to the non-recurring income for the divestment of its 40% interest in Metro Pacific Hospital Holdings, Inc. (MPHHI) to Buhay Ventures Holdings (PH) Inc. (Buhay), a subsidiary of KKR & Co. Inc., for a consideration of ₱30.1 billion of which MPIC had received ₱26.1 billion, with the balance of ₱1.6 billion and ₱2.4 billion payable by Buhay within six months and 12 months of closing, respectively. As part of the transaction, Buhay also invested ₱5.2 billion in MPHHI for business expansion. Buhay had injected half of the committed amount to MPHHI on December 9, 2019 and the remaining half is payable within three years of closing. On a fully diluted basis, MPIC’s effective economic interest in MPHHI was reduced to 20.0% from 60.1% after this transaction. While on December 11, 2019, MPHHI acquired a 77.1% interest in Santos Clinic Incorporated, owner and operator of Manuel J. Santos Hospital for a consideration of approximately ₱373 million.

On the other hand, MPI’s effective ownership in Maynilad is 52.8%. MPI is under the pressure and duress of a Congressional Hearing, prior to which Maynilad was threatened with the revocation of its concession, Maynilad made an oral offer to waive its claims against Republic of the Philippines (RoP) amounting to ₱6.7 billion which represents Maynilad’s foregone revenues for the period March 11, 2015 to December 31, 2017. On the 2nd of January 2020, Maynilad executed the Release From and Waiver of Claim on Arbitral Award (“Waiver”) in favor of the RoP. The main reason why the MPI water segment incurred a net loss of 9.13 billion a plunge of 359% compared to a year ago.

The Philippine pension fund invested MPI. As of March 31, 2020, Government Service Insurance System (GSIS) owned 665,544,524 shares, Social Security System (SSS) owned 372,380,500 shares and SSS Pension Fund owned 14,468,000 shares. It comprises 2.11%, 1.18%, and 0.05% respectively to MPI’s total outstanding shares. I knew that before these pension funds invested their member's money to any company, due diligence is meticulously adopted and it always has strict provisions that the said company is bound to declare yearly dividends consistently. I believed it added confidence and investment value to its investors in the long run.

OBSERVATION: MPI failed in my asset valuation but the rest of the other valuations are intact. My apprehension for MPI is regulatory risk. MPI has a 52.8% slice of Maynilad and it attributed 29% of MPI total revenue. Secondly, its Logistic and Other Services segment continuously incurred losses as well as the Rail segment, while the Power segment barely contributed any income, all comparison to the prior year. The Healthcare segment revenue may improve as the universal effect of COVID-19, which I always referred to as the WUHAN-400 plague, but may offset with the Toll segment. Although MPI’s net income growth for the last 14 years is 69.15% which far better among its peers. The contagion of the coronavirus may depress its income forecast in the near term. Now, is it time to invest MPI? If the latest support at 2.28 will be broken on or before the year-end, then I’m expecting its share price to revisit to its lowest on 28-Oct-2008 at 1.82. I’ll closely monitor the share price movement of MPI and if my target price will be reached, then time to invest all-in, though 2.28 is a huge bargain based on its fundamentals presented above.

DISCLAIMER: I'm not a Certified Financial Planner. Published herein is my personal opinion and should not be construed as a recommendation, an offer, or solicitation for the subscription, purchase or sale of this security.

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