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Aboitiz Power Corp (AP PM) Summary

Core Content

• Share Price: PHP37.15
• Target Price: PHP37.75 (+2%)
• Market Capitalization (USD): 6.3B
• Average Daily Trading Volume (USD): 4M
• Country: Philippines
• Sector: Utilities
• Rating: HOLD (unchanged)

Main Points

• 1Q14 Earnings: Declined by 3% YoY to PHP4.39b, representing 25% of the full-year estimate of PHP17.6b.
• Power Generation Profits: Dropped by 2% to PHP3.79b, primarily due to lower income from Tiwi-Makban (down 32% due to higher steam costs) and Pagbilao (down 5% due to the expiry of tax holiday).
• Power Distribution Earnings: Fell by 17% to PHP318m despite a 5% increase in volume sales, as gross margins declined to PHP1.53/kWh from PHP1.63/kWh.
• Cost Impact: Higher costs offset revenue growth, leading to a decline in net margins.
• Earnings Outlook: The decline in earnings may persist for the rest of the year due to lower earnings from Magat (expiry of tax holiday in June) and potential lower volume sales in 2Q14 due to low water levels.
• Key Metrics:
  • P/E (Core): 15.5x (1Q14)
  • P/BV: 2.9x (1Q14)
  • Net Dividend Yield: 4.5%
  • ROAE: 18.8%
  • ROAA: 9.4%
  • EV/EBITDA: 13.4x (1Q14)

Key Information

• Earnings Breakdown:
  • Core Net Profit (1Q14): PHP17,601.1m
  • Core EPS (1Q14): PHP2.39
  • Core EPS Growth (YoY): -10.7%
• Dividends:
  • Net DPS (1Q14): PHP1.66
• Operating Highlights:
  • Power Generation:
    • Energy Sales (GWh): 2,689 (1Q14)
    • Ancillary Revenues (PHPm): 1,306 (1Q14)
    • Ancillary Revenues Growth: 17%
  • Power Distribution:
    • Volume Sales Growth: 5%
    • Gross Margin: Declined to PHP1.53/kWh
• Key Plants:
  • Tiwi-Makban (Geothermal): Revenue down 32% to PHP1.40b due to higher steam costs.
  • Pagbilao (Coal): Revenue up 22% to PHP1,251m, but margin over fuel cost increased by 19%.
  • Magat (Hydro): Revenue up 41% to PHP170m, but margin over fuel cost decreased by 10%.
  • Binga & Ambuklao (Hydro): Revenue down 83% to PHP102m due to lower energy sales.
• Key Ratios:
  • Revenue Growth (YoY): -6.3% (1Q14)
  • EBITDA Growth (YoY): -2.7% (1Q14)
  • EBIT Growth (YoY): -4.3% (1Q14)
  • Pretax Profit Margin: 34.5% (1Q14)
  • Payout Ratio: 69.3% (1Q14)
  • Current Ratio: 2.0 (1Q14)
  • Debt/EBITDA: 1.7x (1Q14)
• Major Shareholders:
  • Aboitiz Equity Ventures, Inc.: 76.8%
  • ABOITIZ FAMILY: 2.1%
  • The Vanguard Group, Inc.: 0.7%

Summary

The document outlines the financial performance of Aboitiz Power Corp (AP PM) for the first quarter of 2014, highlighting a decline in earnings and profits due to higher costs and operational challenges. Despite a robust top-line growth, the net margins were negatively impacted, leading to a 3% YoY decline in core earnings. The power generation segment faced significant challenges, with Tiwi-Makban and Pagbilao experiencing drops in income due to increased steam costs and the expiry of tax holidays. The power distribution segment also saw a 17% decline in earnings, attributed to lower gross margins and higher expenses. The company's share price is currently at PHP37.15 with a target price of PHP37.75, indicating a slight upward trend. The financial metrics suggest a need for continued monitoring of cost management and the impact of operational constraints, especially related to water levels at hydroelectric plants. The overall outlook remains HOLD, with potential for earnings to persist in decline throughout the year.