Amid the efforts of the government to ensure a level field in business by making private firms accountable for their misdeeds, Metro Pacific Investments Corp. (MPIC) on Wednesday said its board of directors approved plans to allot P5 billion for a share buyback program.
The move was meant to blunt the effects of the decline in the share prices of companies under its wing in the face of the government’s probe in some of its contracts with MPIC, particularly its water business via Maynilad Water Services Inc.
“Our record of consistent growth in earnings and book value per share — the latter at P6.05 at 31st December 2019 — is not translating to share price performance. While we might attribute some of this to market factors and some to conglomerate discount, the discount (so we are advised) reflects concern on political developments”, MPIC chairman Manuel V. Pangilinan was quoted as saying in a filing to the stock exchange.
“In these circumstances, questions have been raised regarding investment in Philippine-regulated infrastructure and the sources of capital to support this. There are no quick or easy answers to these questions but the current model of a listed infrastructure business with a wide pool of dedicated Philippine and foreign shareholders putting their faith in these long-term contracts needs serious review,” he added.
Maynilad booked flat core net income in 2019 at P7.7 billion due to higher amortization and depreciation expenses owing to heavy investments in its non-revenue water reduction program and facilities upgrades. Its revenues, on the other hand, jumped nine percent to P24 billion due to basic and inflation-linked tariff as well as the number of water connections.
MPIC’s share repurchase program will run for three months until 26 May 2020. Companies conduct buyback programs if they deem their stocks to be undervalued, if there’s high volatility in the share price or if it sees the buyback as a way to enhance shareholder value.
As of Wednesday’s trading, shares of MPIC were down 2.94 percent to P2.97 apiece. In the last 52 weeks its shares were sold at a high of P5.28 apiece and a low of P2.69 apiece.
MPIC president and chief executive officer Jose Ma. K. Lim said that MPIC is being forced to recast its investment program for Maynilad due to “lower inbound cash flow, higher regulatory risk and the resulting and self-evident lack of investor enthusiasm for this asset class.”
He said MPIC will divert its investment spending beyond its committed infrastructure projects to “less risky businesses” such as warehousing, real estate and tourism. MPIC did not yet disclose its earnings or capex guidelines for 2020, although Pangilinan said the company will “endeavor” to match its 2019 core income.
Core income higher
The listed conglomerate registered four percent higher consolidated core net income in 2019, to P15.6 billion from P15.1 billion in 2018, owing to strong contributions from its power, toll roads and hospitals businesses.
MPIC attributed the growth of its profit to its highest ever to the 55 percent contribution of Manila Electric Co., equivalent to P11.6 billion, on MPIC’s net operating income.