November 13, 2014

SCC’s 3Q14 net earnings down 30% YoY

Semirara Mining Corporation (SCC), in a one-page disclosure, said consolidated net income amounted to P3.91b in 9M14, down 27% YoY from P5.37b in 9M13. Net of eliminations, SCC’s coal mining business contributed P3.18b, more than double the previous year’s P1.05b while SCC’s power generation subsidiaries contributed P0.73b, 83% lower than P4.32b in 9M13. As expected, SCC’s power generation business recovered strongly in 3Q14, with net income contribution rising to P0.78b in 3Q14 compared with losses of P0.05b in 1H14. Unit 2 of SCC’s 600-MW Calaca coal-fired power plant is now regularly running after having been down for most of 1H14. Meanwhile, SCC’s mining business contributed P0.44b in 3Q14, lower than 1H14’s quarterly average of P1.37b and down 29% from a year ago.

Our take: Despite the power group’s improved performance in 3Q14, quarterly earnings for the group are still down by 30% YoY with both the mining and power group posting earnings decline of 29% and 32%, respectively. Given the results, SCC will likely end up with lower profits in 2014 (vs P7.52b in 2013) but should see a recovery next year when SCC’s second power generation unit, through subsidiary Southwest Luzon Power Generation, begins commercial operations in mid-2015. Using 2015 consensus estimates, the stock currently trades at a PE of 13.2x. - WealthSec