Maharlika Fund gets guaranteed dividends, potential higher payouts in NGCP deal

Joel Consing 
Maharlika Investment Corp. president, CEO 

Maharlika Investment Corp.’s purchase of a stake in National Grid Corp. of the Philippines (NGCP) guarantees a 6.5 percent dividend yield for the first three years, with a step-up to 8 percent if its preferred shares remain unconverted after the period.

This was revealed by Maharlika president and CEO Rafael Jose 'JoelConsing Jr.  during a media briefing on Tuesday.

The government corporation earlier agreed to purchase voting preferred shares that can be converted into common shares, representing 20 percent ownership in Synergy Grid & Development Philippines. 

The listed energy giant controlled by business tycoons Henry Sy Jr. and Robert G. Coyiuto Jr., owns 40 percent of NGCP.

This gives the Maharlika an effective 8 percent stake in NGCP, the private firm that operates the Philippines’ power grid.

Deal completion 

During the media briefing, Consing said the deal finalization could happen in 90 days, with the option to extend for another 90 days, for a total of 180 days. 

Key details in the deal were first reported by InsiderPH, including the 6.5 percent dividend rate and investment of about P30 billion. 

The preferred shares, which are stronger than typical preferred shares due to their voting rights, can be converted into common shares of Synergy Grid after three years.

​Nicky Franco 
Abacus Securities research head 

Step-up feature

Consing explained that the shares include a step-up feature, allowing for an increase in dividend payments if the government decides not to convert the shares in 2028.

“We have the option to convert to common shares. Failing which, the dividend rate will then rise to 8 percent,” Consing said.

AP Securities: There’s upside if Maharlika converts shares

Synergy Grid, which trades under the symbol SGP, rose 4.74 percent to P11.50 per share—still below Maharlika's entry price of P15 per share. 

The stock is also trading about 18 percent below its recent high of P14 per share. 

Alfred Benjamin R. Garcia
AP Securities research head 

Alfred Benjamin R. Garcia, head of research at AP Securities, said there is potential upside if Maharlika converts its preferred shares in three years at the reported P22.50 per share conversion price.

“In terms of profitability, SGP has a pretty decent dividend yield and a good track record of profitability, so it is a worthy first investment for Maharlika,” he said.

Abacus: Sell on strength

“We will still be sellers on strength, especially above P13.00 to P14.00. Meanwhile, we have no buy level if the price continues to fall,” Nicky Franco, head of research at Abacus Securities, said in a note to investors. 

Franco added that the deal is “neutral” for minority investors, as the impact of dividend payouts to Maharlika will likely be offset by debt savings from the fresh government funds.

However, he noted that the Energy Regulatory Commission’s (ERC) expected rate reset could lower NGCP’s earnings.

“If we are correct, earnings will be significantly impacted this year and next. Bottom line, we can only estimate fair value once the overhang from the ERC rate reset is resolved,” Franco said in a note to investors.

“Coupled with high [capital spending] requirements, Synergy’s dividend yield is expected to remain in the low single digits,” he added. 

What's next?

 According to news reports, Consing said the Maharlika Fund is open to purchasing the shares of state-owned China State Grid Corp., which owns 40 percent of NGCP. 

If it becomes available, I think so yes," he said, while clarifying there were no ongoing talks with the Chinese investors. 

About the author
Miguel R. Camus
Miguel R. Camus

Miguel R. Camus has been a reporter covering various domestic business topics since 2009.

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