let’s move forward investor relations focus on nav and...
TRANSCRIPT
1
Let’s Move Forward
INVESTOR
RELATIONS
FOCUS ON NAV
AND DRIVERS
OF VALUE
2
ABOUT MPIC
Metro Pacific Investments Corporation (PSE:MPI) is a Philippine-based, publicly listed investment and management company, focused in infrastructure,
with holdings in Manila Electric Company, Maynilad Water Services, Inc., Metro Pacific Tollways Corporation, Makati Medical Center, Cardinal Santos
Medical Center, Asian Hospital, Davao Doctors Hospital, Riverside Medical Center, Lourdes Hospital, De Los Medical Center, MegaClinic and Central
Luzon Doctors Hospital.
HEADQUARTERS INVESTOR RELATIONS TEAM ([email protected])
10/F MGO Building, Legazpi corner Dela Rosa Streets, VP Investor Relations – Albert WL Pulido ([email protected])
Legazpi Village, Makati 0721 Philippines Group Investor Relations Manager – Maricris C. Aldover ([email protected])
Phone: (+632) 888-0888 / Facsimile: (+632) 888-0813
Email: [email protected]
Official Website: www.mpic.com.ph
DISCLAIMER
This presentation was prepared solely and exclusively for discussion purposes. This
presentation and/or any part thereof may not be reproduced, disclosed or used without the
prior written consent of Metro Pacific Investments Corporation (the “Company”).
This presentation, as well as discussions arising therefrom, may contain statements relating
to future expectations and/or projections of the Company by its management team, with
respect to the Company and its portfolio companies. These statements are generally identified
by forward-looking words such as “believe,” “plan,” “anticipate,” “continue,””estimate,”
“expect,” “may,” “will,” or other similar words. These statements are: (i) presented on the
basis of current assumptions which the company’s management team believes to be
reasonable and presumed correct based on available data at the time these were made, (ii)
based on assumptions regarding the Company’s present and future business strategies, and
the environment in which it will operate in the future, (iii) a reflection of our current views with
respect to future events and not a guarantee of future performance, and (iv) subject to certain
factors which may cause some or all of the assumptions not to occur or cause actual results
to diverge significantly from those projected. Any and all forward looking statements made by
the Company or any persons acting on its behalf are deemed qualified in their entirety by
these cautionary statements.
This presentation is solely for informational purposes and should in no way be construed as a
solicitation or an offer to buy or sell securities or related financial instruments of the Company
and/ or any of its subsidiaries and/or affiliates.
Ticker: PSE:MPI
American Depositary Receipts
ADR Ticker: MPCIY
CUSIP: US59164L2007
Ratio: 1 ADR : 100 Ordinary Shares
Depositary Bank:
Deutsche Bank Trust Company Americas
ADR Broker Helpline:
+1 212 250 9100 (New York)
+44 207 547 6500 (London)
E-mail: [email protected]
ADR Website: www.adr.db.com
Depositary Bank’s Local Custodian:
Deutsche Bank Manila
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INVESTOR RELATIONS PROGRAM
Our main goal in establishing an investor relations function within
the company has always been to keep a two way communication
going between our investors and Senior Management. Part of that
communication process is ensuring we deliver on these metrics:
1. Be as transparent as possible, without compromising our ability
to compete, about our strategy for MPIC and how we implement
in our various portfolio companies
2. Provide a consistent framework that investors can use to
evaluate our progress
3. Keep the conversation going, even in difficult operating or
regulatory environments
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IMPORTANCE OF NET ASSET VALUE ILLUSTRATIONS
It anchors the strategy to something definite
It provides a “price point” which analysts and investors
can refer to with clear assumptions provided
It clearly illustrates various business levers and growth
drivers
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NET ASSET VALUE ILLUSTRATIONS
In PHP BillionsYear of
Entry
Net Invested
Capital*
Analysts'
Consensus
Internal
ValuationValuation Method
Toll Roads 2008 22.4 58.3 122.6 DCF
Power 2009 67.0 93.2 110.3 DCF + Terminal Value
Water 2007 10.8 47.0 54.9 DCF
Hospitals 2007 (0.8) 17.1 31.4 25x EBITDA
Rail 2015 2.3 5.7 5.8 DCF
Total 101.7 221.3 325.0
Net Debt (14.2) **(31.3)
Holding Company Discount (30.4) ***(23.2)
Total Equity Value 176.7 270.5
Per Share 6.39 9.70
GLOBAL ASSUMPTIONS
• WACC at 8.3%*
• Long-term inflation rate of 4.0%
• Outstanding number of shares – 27,867
WACC – 8.3%
• 7% pre-tax cost of debt
• 5.7% risk-free rate based on 20 year
Government Bonds
• Target gearing of 50:50
* Net of sale proceeds and accounting treatment adjustments
** Debt will increase to P55.3 billion over the next few years to fund these projects
*** Holding company discount equivalent to recurring expenses
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COMPARISON OF VALUATION CONSIDERATIONS
Analysts' Consensus Internal Valuation
Toll Roads All Analysts
• NLEX
• CAVITEX
Valued by some analysts:
• SCTEX
• Harbour Link
• DMT / CII
• NLEX
• CAVITEX
• SCTEX
• Harbour Link
• DMT / CII / CALAEX (valued at initial
investment)
• Traffic gains from Connector Road and CALAEX
Power All Analysts
• Distribution Utility
Valued by some analysts:
• Power Generation
• Retail Electricity Sales
• Distribution Utility – WACC at 10.8%
• Power Generationo Quezon Power, Subic (300MW) - DCF / 15%
ROEo GBP and Pacific Light Power -Valued at cost
• Retail Electricity Sales – 100% roll-out, 50%
market share, 4% maximum margins
Water Maynilad West Zone Concession • Maynilad West Zone Concession – Arbitration
WIN by September 2016
• MWIC investment in Rio Verde (valued at cost)
Hospitals Various P/E assumptions • 25x 2016 EBITDA less Net Debt
Rail Based on assumed bid case • Updated assumptions – P47.9 project cost
• Starting fare of P11.00/boarding and P1.0/km
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TOLL ROADS VALUATION SUMMARY
100% 59.9 8.2 36.4 16.1 14.6 8.9 23.8 7.6 15.2 5.5 4.2 3.5 203.9
MPTC 45.3 6.2 27.5 12.2 5.5 6.8 23.8 5.7 7.0 5.5 4.2 3.5 153.2
Net debt (8.5)
Equity value 144.7
MPIC share 144.5
Discount – regulatory friction, project delays etc. (15%) (21.9)
Attributable value 122.6
NLEX
Citi Link
Incremental
traffic from
Connector
Cavitex
SCTEX
TMC
CALAEx
DMT
CII
NLEX
Road
WideningIn PHP Billions
Harbour
Link 1
Harbour
Link 2
TOTAL NLEX at 100% - P144.1B
TOTAL NLEX at MPTC – P103.5B
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TOLL ROADS VALUATION ASSUMPTIONS
RoadCAPEX
(PhP Bn)
Start of
Operations
End of
Concession
Periodic
AdjustmentBasis of Adjustment
NLEX
Phase 1, Seg. 7 and Seg. 8.1 - 2008 2037 Every 2 years CPI / Minimum base escalation of 1.25%
Segment 9 2.0 2015 2037 Every 2 years CPI / Minimum base escalation of 1.25%
Segment 10 + R10 Spur 16.2 2017 2037 Every 2 years CPI / Minimum base escalation of 1.25%
NLEX Road widening 5.5 2017 / 2019 2037
Cit i Link / Segment 8.2 8.2 2020 2037 Every 2 years CPI / Minimum base escalation of 1.25%
Cavitex
R1 Expressway - 2012 2033 Every 3 years CPI and Forex
R1 Extension - 2012 2046 Every 3 years CPI and Forex
C5 Link (Segment 2 & 3) 9.7 2017 2050 Every 3 years CPI and Forex
C5 Link (Segment 5) 1.0 2020 2050 Every 3 years CPI and Forex
SCTEX 5.0 2016 2043 Every year Minimum base escalation of 6%
TMC (DDM) - 2008 N/A N/A N/A
CALAEX (at init ial investment) 23.3 2020 2050 Every 2 years CPI
CII (at cost) - Various Various
DMT (at cost) - 2014 2034 Every 5 years THB 10 for Original Tollway / THB5 for
Northern Extension
70.9
9
TOLL ROADS VALUATION ASSUMPTIONS
TRAFFIC2014 / Base
Traffic
F irst 5
years
Year 6
onwards
NLEX
Open system 127,845 2.2% 1.6%
Closed system
(kms)
3,505,833 2.2% 1.7%
Segment 8.1 16,366 1.7% 1.5%
Segment 9 4,917 2.8% 1.7%
Segment 10 with
R10 spur
6,402 4.8% 2.1%
Citi Link / Segment
8.2
21,463 5.8% 1.7%
Cavitex
R1 Expressway 85,920 6.2% 4.8%
R1 Ex tension 17,201 10.5% 3.7%
C5 Link
Segment 2 30,231 3.0% 2.9%
Segment 3 39,913 4.1% 4.1%
Segment 5 10,680 8.3% 6.2%
SCTEX 35,356 7.3% 3.5%
CALAEX 68,882 6.0% 3.3%
Average Traffic
Growth
CLASS 1 TOLL RATES - In PhP
(Exclusive of Value-Added Tax)2015 2016 2017 2018 2019 2020
NLEX
Per entry
Open system, beginning tariff 41.00 41.00 41.00 67.00 67.00 75.00
Periodic adjustment - - 13.11 - 8.00 -
Segment 9 - - - - - -
Segment 10 (with R10 spur) - - 12.89 - - -
Citi Link - Segment 8.2 - - - - - 4.00
Open system, ending tarif f 41.00 41.00 67.00 67.00 75.00 79.00
Per kilometer travelled
Closed system, beginning tariff 2.38 2.38 2.38 3.67 3.67 4.60
Periodic adjustment - - 0.93 - 0.45 -
Road widening - - 0.36 - 0.48 -
Closed system, ending tarif f 2.38 2.38 3.67 3.67 4.60 4.60
CAVITEX (Per entry)
R1 Expressway, beginning tariff 22.00 22.00 22.00 27.00 28.00 28.00
Periodic adjustment - - 5.00 1.00 - -
R1 Expressway, ending tarif f 22.00 22.00 27.00 28.00 28.00 28.00
R1 Extension, beginning tariff 57.00 57.00 57.00 68.00 68.00 68.00
Periodic adjustment - - 11.00 - - -
R1 Extension, ending tarif f 57.00 57.00 68.00 68.00 68.00 68.00
Beginning Toll Rate
Segment 2 12.50
Segment 3 40.00
Segment 5 5.65
TOLL RATE MULTIPLIER NLEX SCTEX CAVITEX
Class 1 1.00 1.00 1.00
Class 2 2.50 2.00 2.00
Class 3 3.00 3.00 3.00
ILLUSTRATIVE TOLL RATE ADJUSTMENTS
10
POWER VALUATION SUMMARY AND ASSUMPTIONS
MERALCO - 100%NAV
(In Php Bn)NAV/sh
Distribution 174.4 154.79
Retail electricity sales 124.5 110.43
Generation 52.8 46.88
Net cash 6.4 5.68
358.1 317.78
MPIC SHARE – 32.48%NAV
(In Php Bn)NAV/sh
Distribution 56.7 2.03
Retail electricity sales 40.4 1.45
Generation 17.1 0.62
Net cash (MER) 2.1 0.07
Net debt at Beacon (6.0) (0.22)
110.3 3.95
Rate Rebasing Assumptions
Regulatory annual growth 3.50%
Average annual capex PhP11.8bn
Regulatory WACC 10.80%
Regulatory asset base PhP138.0bn
POWER GENERATION
RETAIL ELECTRICITY SALES
• Gradual roll-out to 100% of contestable market
• MERALCO market share of 50%
• Maximum margins of 4% - based on discounting
margins of 7% benchmarked around the world for
retail electricity sellers
Power Plant CapacityCost
(PhP Bn)Valuation Method
San Buenaventura
(Quezon)
460MW 41.4 DCF based on
15% ROE
RP Energy (Subic) 300MW* 27.0 DCF based on
15% ROE
Global Business
Power
709MW 7.3 Acquisition Cost
Pacific Light 800MW 8.8 Acquisition Cost
* Upside of additional 300MW not included
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WATER VALUATION SUMMARY
WATER
Enterprise value 119.8
Net debt (17.7)
Equity value 102.1
MPIC ownership 52.8%
Attributable share - Maynilad 53.9
MWIC (at initial investment cost) 1.0
Total attributable share 54.9
Rate Rebasing Assumptions (Amounts in PhP Billion)
ADR (2018 onwards) 8.3%
2013 Opening cash position P66.0
Long-term inflation rate 4.0%
Concession Fees
2013 to 2017 P6.0
2013 to 2037 P21.5
Capital Expenditure Commitment
2013 to 2017 P59.0
2013 to 2037 P239.0
Operating Expenses
2013 to 2017 P31.0
2013 to 2037 P183.0
• Assumes 2016 and 2017 inflation
adjustments are implemented
• Rate rebasing adjustment to be
implemented in 2018 based on
latest benchmarking