20140320-Maybank_KERPL-Aboitiz_Power_Corp_Still_fully_valued_15页_758kb

Aboitiz Power Corp (AP PM) Summary

Core Content

Aboitiz Power Corp (AP) is a Philippine-based utility company with a market capitalization of PHP293.6B and a share price of PHP39.90. The company's target price has been revised to PHP37.75, reflecting a 5% decrease. The stock is currently rated as HOLD, indicating that it is considered fully valued based on its fundamentals.

Main Points

• 2013 Performance: AP's core profits were in line with expectations, with a decline of 15% YoY to PHP20.12b. Core earnings for the power generation segment dropped 21% to PHP17.20b, while power distribution profits increased 15% to PHP3.23b.
• 2014 Forecast: 2014 profits are expected to decline 11% to PHP17.60b due to higher tax provisioning from the expiry of tax holidays for Pagbilao and Magat power plants.
• 2015 Outlook: A recovery is anticipated in 2015 with a 11% increase in profits to PHP19.49b, driven by new power projects coming online.
• Dividend Yield: AP's share price has been supported by a high dividend yield of 4.1% in 2013, which is a key factor in its valuation.
• Market Performance: AP outperformed the market in 2013 with a 17.35% rise in share price, despite weaker earnings.

Key Information

• Share Price: PHP39.90
• Market Cap (USD): 6.6B
• Target Price (PHP): 37.75 (-5%)
• Free Float (%): 19.6
• Issued Shares (m): 7,359
• Major Shareholders:
  • Aboitiz Equity Ventures, Inc.: 77%
  • ABOITIZ FAMILY: 2%
  • The Vanguard Group, Inc.: 1%

Financial Highlights

Performance Analysis

• Share Price Performance:
  • 1 Month: +4.7%
  • 3 Months: +18.6%
  • 12 Months: +7.1%
• Relative to Country:
  • 1 Month: +2.0%
  • 3 Months: +8.7%
  • 12 Months: +6.5%

Key Drivers

• Power Generation:
  • Core profits declined due to the expiry of tax holidays for major plants, notably Pagbilao and Magat.
  • Spot market prices rose significantly, leading to higher average selling prices but also increased fuel costs.
• Power Distribution:
  • Continued growth with a 15% increase in profits to PHP3.23b in 2013.
  • Higher gross margins and volume sales contributed to this growth.
• Ancillary Services:
  • SNAP's ancillary revenues dropped due to lower average rates, though energy sales increased significantly.
  • The impact of WESM rate adjustments was neutral to positive for the company, especially for Pagbilao, which benefited from reversed overpayments.

Outlook

• 2014: Earnings are expected to decline due to tax provisions, but the company is anticipated to recover in 2015 with new projects coming online.
• Valuation: The stock is viewed as fully valued, leading to a HOLD rating. The core P/E ratio is projected to decrease slightly in 2015.

Key Figures

• 4Q13 Core Net Income: PHP17.20b
• 2013 Full-Year Core Net Income: PHP19.72b
• 2013 Full-Year Reported Net Income: PHP18.58b
• 4Q13 Dividend Yield: 4.1%
• 4Q13 Net DPS (PHP): 1.66
• 4Q13 Revenue from Energy Sales: PHP16.986b
• 4Q13 Ancillary Revenues: PHP1.587b

Summary of Key Projects

• Tudaya and Sabangan Plants: Expected to begin operations in 2014, contributing to future growth.
• Davao Coal Plant: Expected to begin operations in 2015, further boosting profits.
• Pagbilao and Magat: Major contributors to profits, affected by tax changes and WESM rate adjustments.

Additional Notes

• The company has a strong shareholder base with Aboitiz Equity Ventures, Inc. holding the majority of shares.
• AP's financial performance is influenced by both internal factors (such as tax holidays) and external market conditions (like WESM rates and fuel costs).
• The company is expected to maintain a strong dividend yield and cash flow generation.