20131104-Maybank_KERPL-Aboitiz_Power_Corp_Profit_decline_still_within_expectations_11页_555kb

Aboitiz Power Corp Summary Report - November 4, 2013

Core Content

Aboitiz Power Corp (AP) is the holding company for the Aboitiz Group's investments in power generation and distribution. The company's share price is PHP34.00, with a target price of PHP35.05, unchanged from previous assessments. The report provides an analysis of AP's financial performance, key indicators, and future outlook.

Main Points

• Earnings Performance:
  AP's earnings declined for the third consecutive quarter in 2013, with a 22% drop in reported income and a 23% decline in recurring income YoY. The decline was primarily due to higher steam costs, especially from the expiry of Tiwi-Makban's steam supply agreement in May, which caused a 43% drop in net profits from the geothermal plant. Lower ancillary revenues and reduced margins also contributed to the decline.

• Profitability Metrics:

  • ROE: 23.8% (down from 33.5% in 2011)
  • Net Debt: PHP30,604 million
  • NTA per share: PHP12.15
  • Interest cover: 2.3x

• Power Generation Performance:

  • Power generation profits: Declined 28% to PHP4.20 billion
  • Ancillary services: Decreased by 22% due to lower acceptance rates
  • Average selling prices: Down YoY and QoQ, averaging PHP4.73/kWh for bilateral sales and PHP4.54/kWh for spot market sales in 9M13
  • Volume sales: Net generation increased by 2% in 3Q13, while spot market sales rose by 33% to 1,484 GWh

• Power Distribution Growth:

  • Net profits: Increased by 5% to PHP801 million in 3Q13
  • Volume sales: Rose by 4% to 1,027 GWh
  • Key contributors: Davao Light (PHP442 million, +6%) and Visayan Electric (PHP235 million, +15%)
  • YTD: PHP2.4 billion in power distribution profits, up 11% year-on-year

• Future Outlook:

  • 2014 Earnings: Expected to decline by 12% due to continued elevated steam costs and the end of income tax holidays for some plants, such as Pagbilao (January 2014) and Magat (July 2014)
  • Market Cap: PHP250,192.5 million (PHP5,790.1 million USD)
  • Free float: 19.7%

Key Financial Tables

Earnings Table (PHPm)

Key Financial Indicators

• ROE: 23.8%
• Net Debt (PHPm): 30,604
• NTA per share (PHP): 12.15
• Interest cover (x): 2.3

Performance Metrics (52-week High/Low)

• Absolute (%): 7.9 (1-mth), -2.7 (3-mth), -8.8 (6-mth), 2.7 (1-yr), -8.0 (YTD)
• Relative (%): 1.6 (1-mth), -1.9 (3-mth), -2.0 (6-mth), -18.7 (1-yr), -21.3 (YTD)

Cash Flow (PHPm)

Balance Sheet (PHPm)

Ratios

Income Tax Holidays Schedule

*Secured one year extension of income tax holiday.

Summary

• Earnings Decline: Continued in 3Q13, with a 22% drop in reported income and a 23% decline in recurring income YoY.
• Profitability: ROE decreased to 23.8%, while net debt remained at PHP30,604 million.
• Power Generation: Profits dropped 28% due to higher steam costs and lower ancillary services.
• Power Distribution: Continued growth with 5% increase in net profits to PHP801 million in 3Q13.
• Future Challenges: Expected 12% profit decline in 2014 due to elevated steam costs and tax provisions.
• Valuation Metrics: Market cap at PHP250,192.5 million, with a P/BV of 2.8 and Net Gearing at 33.5%.
• Dividend and Earnings: DPS at PHP1.66 in 2013, with recurring basic EPS at PHP2.76.

Research Contacts

• Laura Dy-Liacco:

  • Email: Laura_DyLiacco@maybank-atrke.com
  • Phone: (632) 849 8840
  • Role: Research Analyst

• Wong Chew Hann, CA:

  • Email: wchewh@maybank-ib.com
  • Phone: (603) 2297 8686
  • Role: Regional Head, Institutional Research

• Alexander Gart Hoff:

  • Email: agarthoff@maybank-ke.com.sg
  • Phone: (852) 2268 0638
  • Role: Institutional Product Manager

• Suhaimi Lias:

  • Email: suhaimi_iliais@maybank-ib.com
  • Phone: (603) 2297 8682
  • Role: Chief Economist

• Luz Lorenzo:

  • Email: luz_lorenzo@maybank-atrke.com
  • Phone: (63) 2 849 8836
  • Role: Head of Research, Philippines

• Ramon Adviento:

  • Email: ramon_adviento@maybank-atrke.com
  • Phone: (63) 2 849 8845
  • Role: Mining Analyst

• Sukit Udomsirikul:

  • Email: sukut@maybank-ke.co.th
  • Phone: (66) 2658 6300 ext 5090
  • Role: Head of Research, Thailand

• Michael Kokalari, CFA:

  • Email: michael.kokalari@maybank-kimeng.com.vn
  • Phone: (84) 838 38 66 47
  • Role: Head of Research, Vietnam

Disclaimers

• The report is based on information from reliable sources but has not been independently verified.
• MKE disclaims any liability for losses or damages arising from reliance on this report.
• Forward-looking statements are subject to risks and uncertainties.
• The report is intended for MKE's clients only and cannot be reproduced or distributed without consent.