October 28, 2013

MER 9M13 Core Income up 5% YoY

Manila Electric Company (MER, Buy) reported 9M13 consolidated core net income of P13.6b, up 5% YoY. This was despite the 3% YoY decline in consolidated revenues on lower average price of purchased power of five new power sales agreements that were implemented before this year. Energy sales however went up 4.8% YoY to 25,616GWh. Core EBITDA also grew 12% YoY to P24.6b on lower costs and expenses.

Our take:The results came in slightly ahead (76%) of consensus full-year forecast (P17.9b) and 77% of our own full-year estimate of P17.6b despite the typhoon season which would have resulted in foregone sales. Energy sales growth of 5%YoY also accelerated from the 4% growth registered in 1H13 on faster growth rates across all segments.

What is noteworthy is the company’s success in keeping costs lower (-5% YoY) which led to higher core EBITDA margin (12% in 9M13 vs 10% in 9M12 an 11% in 1H13). We also take note of the company’s P58.8b cash balance (already net of cash dividends paid on the 1H13 core net income) that translated to a P34.4b net cash position for the period. We will be releasing a longer note on the salient points of MER results today.– WealthSec