Tycoon Manuel V. Pangilinan said Manila Electric Co. (Meralco) remains “considerably undervalued” despite its prospects, acknowledging that growth has not translated into share price gains amid shortcomings in communicating opportunities to investors.
“Part of it is our duty on our part to explain better to our investors and to the investors’ community in general what are the real innards of Meralco and what the prospects are,” Pangilinan, the chair and CEO of the energy distribution giant, said during the company’s stockholders’ meeting on Tuesday.
"So, we have that job to do in terms of communicating to the investor community,” he added.
Pangilinan was addressing a stockholders’ concern on the drop in the company’s share price below P370 per share from over P400 apiece before the pandemic.
While Meralco is faring relatively better than the roughly 20 percent decline in the PSE Index over the same timeframe, Pangilinan said the company should be worth much more, citing a range of profitably indicators on top of its growth prospects in power generation and distribution.
“We agree that the current share price… is undervalued,” said Pangilinan.
Price constraints
Pangilinan further explained that the company trails the value of its close peers in the industry. When taking into account Meralco’s projected growth in 2024, he said the firm is valued “quite low for a utility company”.
“Part of it structural on the [Philippine Stock Exchange] itself and on the companies that are members of the Exchange and part of it is our duty to explain better to our investors,” he said.
“There’s a bit of a limit to what management can do. I think you’ve seen the numbers of Meralco in [2023] and if the numbers of Meralco are going to be better in [2024] that’s most of what we can do to show good performance year-on-year,” Pangilinan said.
Sizzling summer fails to heat up shares
During the meeting, Meralco chief revenue officer Ferdinand Geluz said the El Niño phenomenon triggered a spike in energy usage in recent months.
“Because of the higher heat index brought by the El Niño phenomenon, and based on our data, average household consumption further increased by another 10 percent compared to the summer last year,” he said.
Analyst view
COL Financial Group chief equity strategist April Lynn Tan said on Tuesday Meralco remains a decent defensive play and is one of their top stock picks for 2024.
COL Financial maintains its buy rating on the stock with a target price of P446 per share.
This suggests an upside of over 21 percent from its current price of P366.20 as of this writing.
Miguel R. Camus has been a reporter covering various domestic business topics since 2009.
