Quarterly Updates

  • 1Q21 attributable net income fell 8% to P1.3 billion, matching our expectations due to poor earnings contributions from East Concession (-29 percent to P1.26 billion) and MWPV (net loss of P56mn, lower vs. 1Q20). MWAP, on the other hand, has recorded earnings for the year under evaluation (P123mn vs. P193mn net loss in 1Q20).
  • Capex for the quarter totaled P2.58 billion (+14 percent), with the East Zone Concession accounting for more than 80% of the total.

East Zone Concession

  • Owing to lower billed volume (-6 percent to 117.7mcm) in the commercial and industrial sectors, net profits fell by 29 percent to P1.28 billion on a poor topline (-11 percent to P3.9 billion) (-24 percent combined). The average tariff has also dropped to P31.90 per cubic meter (-6 percent ). The drop was also attributed to a rise in income taxes (+51 percent to P582 million) as a result of CREATE Law’s retroactive tax amendments.
  • Both the Angat and La Mesa dams were operational, allowing for the continuation of water services. Meanwhile, the Marikina River Water Supply Campaign is also currently ongoing.

Manila Water Philippine Ventures (MWPV)

  • Thanks to lower equity share in associates’ net profits, 1Q21 net income was P123 million, up from P193 million in 1Q20 (-22 percent to P171mn). Core net income dropped 14% to P123mn in 1Q20, except one-time costs linked to its Cu Chi Water investment.


Using DCF, we keep our TP at P16.58/share, but upgraded our call to LONG-TERM BUY. Based on the anticipated rate rebasing in 2022, upward changes are expected. Based on a historical average of 9x, P/Es are also trading at a 24 percent discount. When realized, this rate rebasing will enable MWC to recoup losses and reach the new rate of return of 12%. MWC’s dedication to its concession zone is unwavering, while Razon Group’s entry will boost dynamics, especially on the foreign front.


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