Aboitiz Power Corp (AP) Results Review - 6 August 2013
Core Content Summary
This document provides an analysis of Aboitiz Power Corp's (AP) financial performance for the second quarter of 2013 and the first half of the year. The summary includes key financial indicators, earnings performance, and insights into the company's operations.
Key Information
- Share Price: PHP33.45
- Target Price: PHP35.05 (unchanged)
- Major Shareholder: Aboitiz Equity Ventures, Inc. (77%)
- Shares Issued (m): 7,358.6
- Market Cap (PHPm): 246,145.2
- Market Cap (USDm): 5,662.9
- 3-mth Avg Daily Turnover (USDm): 2.43
- PSEi: 6,509.73
- Free Float (%): 19.7
Key Indicators
| Indicator |
Value |
| ROE (%) |
23.8 |
| Net Debt (PHPm) |
30,604 |
| NTA/shr (PHP) |
12.15 |
| Interest Cover (x) |
2.3 |
Earnings Performance
- Quarterly Recurring Earnings: PHP6.35b (down 1% YoY)
- Power Generation Profits: PHP5.54b (down 8% YoY)
- Power Distribution Profits: PHP879m (up 29% YoY)
- Year-to-Date Recurring Earnings: PHP10.89b (down 6% YoY)
- Full-Year Target: PHP20.43b (53% achieved)
Performance Analysis
| Period |
Absolute (%) |
Relative (%) |
| 1-mth |
-2.6 |
-2.8 |
| 3-mth |
-11.3 |
-1.5 |
| 6-mth |
-12.2 |
-12.8 |
| 1-yr |
-1.6 |
-24.8 |
| YTD |
-9.5 |
-21.5 |
Power Generation Analysis
- Tiwi-Makban: Shifted to new pricing scheme for steam (effective 26 May), but earnings impact was muted due to lower purchased power costs. Gross margin improved, with average cost of steam and purchased power declining 31% to PHP1.32/kWh, and average selling prices rising 3% to PHP4.84/kWh.
- Pagbilao: Net profits declined 60% YoY due to forex losses, but gross profit improved by 25%.
- Magat and Binga-Ambuklao: Combined profits down 69% YoY, primarily due to a decline in ancillary revenues and average selling prices.
- Ancillary Revenues: Declined 63% to PHP1.49b due to lower acceptance rates by NGCP.
Power Distribution Analysis
- Profits: PHP879m (up 29% YoY)
- Electricity Demand: Increased 4% to 1,041 GWh due to seasonal factors
- Customer Segments:
- Commercial & Industrial: 752 GWh (72% of total)
- Residential: 289 GWh (up 8.6% YoY)
- System Loss Levels: Improved for VECO and CLPC, now below regulator-imposed caps.
Contract Renegotiation
- AP is in ongoing talks with the steam supplier to replace the current contract with a revenue-sharing scheme to maximize Tiwi-Makban's utilization.
- Net Sellable Capacity: Declined to 400 MW from 467 MW due to reservoir decline and lack of new drilling projects.
Financial Forecasts
- Recurring Net Profit to Common: Expected to decline further in 2014 to PHP17,812m
- EPS Growth (%): Declined in 2013 and expected to continue
- Dividend Yield (%): Increased to 4.9 in 2013
- Net Gearing (%): Declined to 25.3 in 2013
Income Statement Highlights
| Item |
2011 (PHPm) |
2012 (PHPm) |
2013F (PHPm) |
2014F (PHPm) |
| Revenue |
54,476 |
62,153 |
61,510 |
64,892 |
| EBITDA |
32,138 |
33,885 |
31,194 |
30,856 |
| Net Profit to Common |
24,407 |
21,608 |
20,398 |
17,874 |
| Recurring Net Profit to Common |
23,702 |
21,105 |
20,326 |
17,812 |
Cash Flow Analysis
| Item |
2011 (PHPm) |
2012 (PHPm) |
2013F (PHPm) |
2014F (PHPm) |
| Cash Flow from Operations |
24,842 |
22,642 |
22,257 |
19,005 |
| Net Capex |
-9,858 |
-8,296 |
-3,867 |
-2,778 |
| Change in Cash |
7,287 |
5,090 |
3,616 |
20,228 |
Balance Sheet Highlights
| Item |
2011 (PHPm) |
2012 (PHPm) |
2013F (PHPm) |
2014F (PHPm) |
| Total Assets |
163,272 |
153,528 |
169,642 |
192,303 |
| LT Debt |
61,505 |
70,298 |
63,289 |
63,011 |
| Shareholders' Equity |
81,231 |
68,559 |
89,414 |
96,61 |
Main Points
- Earnings Decline: AP's recurring earnings declined 1% YoY in 2Q13, with power generation being the main drag.
- Impact of Forex Losses: Consolidated reported income dropped 22% mainly due to a nonrecurring forex loss, but this is expected to reverse in 2H13.
- Tiwi-Makban's Performance: Improved income contribution to AP due to lower purchased power costs, despite higher steam prices.
- Pagbilao's Decline: Earnings fell 60% YoY due to forex losses, but energy sales increased 22%.
- Magat and Binga-Ambuklao: Continued underperformance, with profits down 69% YoY.
- Power Distribution Growth: Increased 29% YoY, driven by higher electricity demand and improved system losses.
- Contract Renegotiation: Ongoing efforts to replace the steam contract with a revenue-sharing scheme to enhance plant utilization.
- Financial Outlook: Forecasts remain unchanged for now, with a HOLD rating maintained due to weak performance in power generation.
Conclusion
AP's financial performance in 2Q13 was marked by a decline in recurring earnings, primarily due to lower power generation profits. While the power distribution segment showed growth, it was not enough to offset the weakness in the power generation segment. The company is actively negotiating a new steam contract and is expected to benefit from forex reversals in the second half of the year. Financial forecasts remain unchanged, and the HOLD rating is maintained.
