MER, powered by strong performance, diversification

Everyone’s talking about the remarkable increase in the share price of MER or Manila Electric Co., the Pangilinan-led listed power distribution giant.

Last week, during the press briefing of Metro Pacific Investments Corp. (MPIC), I asked Meralco president and CEO Ray Espinosa about the steady increase in the company’s share price.

He said the strength comes from the investment public’s appreciation of the company’s strong performance last year, rosy prospects for this year, and Meralco’s diversification.

Espinosa was all smiles as he talked about Meralco’s share price, and for good reasons. The price has been reaching new 52-week highs many times already the past several months.

Analysts have been talking about it, while happy investors have been popping the champagne bottles.

From a 52-week low of P263.20 per share, the new 52-week high is P377.60, recorded just last week. Its last closing price was P370.

Strong performance

Meralco’s 2021 performance was remarkable, indeed, with energy sales growing six percent last year.

Core profit grew by 13 percent to a whopping P24.6 billion last year from P21.7 billion in 2020. Net income jumped by 44 percent year-on-year to P23.5 billion from P16.3 billion. This was due to the absence of exceptional charges arising from the impairment recognized in 2020 on its investment in PacificLight Power Pte. Ltd.

Consolidated revenues went up by 16 percent to P318.5 billion from P275.3 billion, mainly driven by electricity revenues, which grew by 15 percent to P309.2 billion.

This, as total energy sales grew six percent last year to 46,073 GWh, with residential volumes growing three percent despite cooler temperatures and continued work-from-home and remote learning arrangements amid lockdowns. This accounted for 37 percent of total energy sales, according to Meralco’s regulatory filing.

In all, energy sales volumes returned to near pre-pandemic levels as customer count reached 7.4 million at end-2021.

Commercial energy sales volume, likewise, showed a three percent growth last year as restrictions eased and more people got vaccinated. These developments translated to higher foot traffic, driving demand in the retail, restaurants, public transport, and hospitality sectors.

Industrial sales volumes also returned to near pre-pandemic level, with its 13 percent growth, owing to the strong performance of the semiconductor industry due to  high demand for microchips, electronic parts, and devices, as well as higher operational output in the construction-related (cement and steel), food and beverage, and plastics industries, Meralco said.

Espinosa said that, indeed, commercial sales started to recover, especially in the latter part of last year.

“We see that growth, hopefully, continuing,” he said.

Power and tower

Aside from the company’s strong financial performance, Espinosa also talked about Meralco’s diversification, particularly its move to participate in the government’s common tower program.

Meralco subsidiary Meralco Industrial Engineering Services Corporation (MIESCOR) is one of the eight companies licensed by the Department of Information and Communications Technology (DICT) to operate as independent tower companies (ITCs), with each ITC having secured a five-year certificate of registration.

This is a business that is within the expertise of MIESCOR, given its experience as an EPC (engineering, procurement and construction) contractor.

Meralco, by the way, also owns and operates 200 telecom towers for its own telecommunications requirements.

Espinosa said investors are appreciating the diversification in the common tower space as it is different from the heavily regulated power business.

Long, colorful history

Meralco chairman Manuel V. Pangilinan must be popping the champagne bottles, too, over the company’s performance last year.

“Our excellent operational and financial performance in 2021 reflects Meralco’s continuing efforts to invest in customer-centric innovations and in our digital transformation journey to deliver quality and reliable service to more than seven million customers in the midst of a continuing pandemic,” he said.

What a difference 13 years can make.

Imagine that in 2009, Pangilinan was still caught up in a bidding war over the Lopez family’s stake in the power distributor.

All that is now just a page in history, although some tycoons still look back to those tumultuous days and continue to wonder why the Lopezes, who acquired Meralco from an American company in 1961, sold their stake in the company that was once considered their family’s crown jewel.

More juice

Going back to the share price, it’s come a long way too from P58 in January 2009.

Some brokerage houses expect Meralco’s shares to continue moving up, with some saying the price may hit P400 to P450.

We’ll have to wait and see. Of course, in the stock market, as it is in life, nothing is certain, except ups and downs.

But Espinosa said there’s still “some more values out there.”

“Hopefully, there’s still some juice left,” he said.

Iris Gonzales’ email address is [email protected]. Follow her on Twitter @eyesgonzales. Column archives at eyesgonzales.com