Meralco's 2006 power sales to stay slow--JP Morgan
Monday, March 13, 2006
Cecille YapXFN-Asia
MANILA Electric Co's (Meralco's) electricity sales will continue to grow slowly this year as higher tariffs dampen consumption, and investors may refrain from picking up its stocks because the company is involved in litigation about the rates it charges, JP Morgan said.
The brokerage said it is keeping its "neutral" rating for Meralco, with a price target of 19.25 pesos per share for Meralco's widely-traded B-shares.
Although Meralco has been making operational improvements such as lower systems losses, investors are still focussed on one case, now in the Supreme Court, about whether the company should have been allowed to increase its tariff by 0.17-peso per kilowatthour in 2003, and another, in a lower court, about whether it should have been allowed a 0.13-peso increase in its generation charges in 2004, JP Morgan said.
The brokerage firm estimates that Meralco made provisions about 6.2 billion pesos last year and is expected to do so again this year because the distributor continues to collect the higher rates that it began to charge in 2003.
"Until these issues are cleared up, we think the stock will remain unexciting," said JP Morgan analyst Joe Liew.
Liew said Meralco may have ended last year with electricity sales growing at only 0.6 percent as pass-through increases in fuel prices and the imposition of the value-added tax (VAT) on electricity weighed on usage.
"Electricity prices rose an additional 9 percent since November 2005 as a result of the implementation of the VAT. We think electricity sales in 2006 will continue to be slow and hence there is downside risk to our current 3.7-percent electricity sales growth assumption for 2006," Liew said.
From a net loss of 2.61 billion pesos in 2004, Meralco is expected to have posted a narrower net loss of 1.11 billion pesos last year, JP Morgan said.
For this year, it expects Meralco to post a net loss of 1.2 billion pesos.
At 11:16 am, Meralco A-shares, restricted to Filipino investors, were steady at 12.75. Meralco B-shares, available to foreigners, were unchanged at 19.25.
(1 dollar = 51.457 pesos)
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posted by philpower @ 11:11 AM,
