T HU 30 M AR 2017
Most companies deliver better than expected
results in FY16
Four out of five companies exceed expectations
FY16 earnings results of power companies were generally good. Core profits of four out of the five
power companies that we cover delivered better than expected results in FY16. Companies that
outperformed are AP, EDC, SCC and MER. On the other hand, FGEN’s core earnings disappointed
relative to our expectations as a result of the delay in the completion of the San Gabriel gas plant.
However, its core performance was still better compared to consensus estimates.
Classified according to types of plant, revenues of large hydro plants (Magat, Ambuklao-Binga,
Pantabangan-Masiway) beat expectations mainly due to better water availability in 2016 compared
to 2015. However, plants that were exposed to the spot market (such as EDC’s Bacman geothermal
plant) posted weaker than expected revenues as a result of the persistent weakness in WESM
prices. Unplanned plant outages also negatively affected the results of some companies such as AP
and SCC.
Exhibit 1: Power companies FY16 earnings summary
in PhpMil
4Q15
4Q16
% Change
AP
5,367
5,419
1.0
EDC
1,808
2,476
36.9
FGEN (in US$Mil)
47
300
536.9
SCC
2,241
2,489
11.1
MER
3,092
4,617
49.3
FY16
20,614
9,522
200
12,041
19,583
% of FY forecast
COL
Consensus
102.2
106.8
102.0
105.0
119.9
131.4
107.2
102.2
95.8
102.3
So urce: EDC, FGEN, A P , SCC, M ER, COL an B lo o mberg estimates
EDC earnings beat forecast on lower than expected operating expenses
EDC’s core net income for FY16 rose 5.5% to Php9.52Bil, above COL (103%) and consensus
(105%) forecast. Revenues were flat year on year at Php34.2 Bil and were in line with estimates,
as the higher than expected revenues of FG Hydro and Unified Leyte were offset by the weaker than
expected performance of the Bacman and Burgos Wind.
Earnings beat estimates mainly due to
lower than expected operating expenses which declined 8% to Php19.3Bil, representing only 96.6%
of our full year forecast.
FGEN earnings exceed forecast on one-off income, recurring profits sliglty
below forecast
FGEN’s FY16 net income increased by 19.8% to US$200Mil, around 20% higher than COL’s forecast.
Earnings beat estimates mainly due to the booking of US$36Mil worth of income from liquidated
damages arising from construction delay for the San Gabriel gas plant. Excluding one-offs, recurring
George Ching
Senior Research Manager
[email protected]
Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
P o w er S ect o r I M o st co m p an i es d el i ver b et t er t h an exp ected r esul ts i n FY 16
TH U 30 MAR 2017
profits were flat at US$162Mil, slightly lower than our expectation (97% of COL forecast) although
still higher than consensus forecast (106% of consensus forecast). Earnings trailed expectations
due to the delay in the completion of the San Gabriel gas plant.
MER core operating performance beats estimates
Meralco’s FY16 core net income rose 3.7% to Php19.6Bil, lower than COL forecast (95.8%) but
in line with consensus forecast (99.4%). Earnings trailed COL forecast primarily due to higher
provisions made for the period (other expenses of Php9.4Bil in FY16 vs COL forecast of Php5Bil).
However, MER’s FY16 core operating performance as measured by its net distribution revenues
were stronger than expected.
Net distribution revenues for FY16 rose 3.3% to Php56.9Bil,
representing 102.3% of our full year forecast.
AP earnings beat forecasts, operating performance in line
AP’s FY16 core earnings jumped 12.2% to Php20.6Bil, exceeding both COL (109.4%) and
consensus (106.8%) forecasts. The increase in earnings was mainly brought about by the first
time earnings contribution of the 300MW Davao coal plant. However, earnings beat estimates
most likely due to lower than expected interest and other expenses and the first time earnings
contribution from GNPower (acquired in 4Q16). AP’s core operating performance as measured by
EBITDA was in line with estimates, with power generation accounting for 100.3% of our full year
forecast, power distribution accounting for 101% of our full year forecast. Information on revenues
and average selling price for AP’s individual power plants are still not available.
SCC earnings beat estimates on interest and other income, operating
income lags forecast due to provisions
SCC’s FY16 earnings rose 41.9% to Php12Bil. Results were better than COL (107.2%) and
consensus (102.2%) estimates. Despite the stronger than expected revenues generated from its
coal mining business, operating income amounted to Php12.9Bil, representing only 94.6% of our
full year forecast. Expenses surged in 4Q16 as SCC booked Php1.1Bil in provision for the mine
rehabilitation of the Panian pit and Php600Mil in expenses for the slope stability of the new Narra
Mine. Despite the lower than expected operating income, net income still beat our forecast mainly
due to lower than expected interest expense and other income.
Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside
of the COL Financial website as these may be subject to tampering or unauthorized alterations.
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P o w er S ect o r I M o st co m p an i es d el i ver b et t er t h an exp ec ted r esul ts i n FY 16
TH U 30 MAR 2017
Important Rating Definitions
BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.
HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.
SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.
Important Disclaimer
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount
invested. Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said
information may be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the
report and are subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase
or sale of a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the
companies mentioned in this report and may trade them in ways different from those discussed in this report.
COL Research Team
April Lynn Tan, CFA
VP & Head of Research
[email protected]
Charles William Ang, CFA
George Ching
Richard Lañeda, CFA
Deputy Head of Research
Senior Research Manager
Senior Research Manager
[email protected]@[email protected]
Frances Rolfa Nicolas
Andy Dela Cruz
Justin Richmond Cheng
Research AnalystResearch AnalystResearch Analyst
[email protected]@[email protected]
Kyle Velasco
Research Analyst
[email protected]
Contact
COL Financial Group, Inc.
2402-D East Tower, Philippine Stock Exchange Centre,
Exchange Road, Ortigas Center, Pasig City
1605 Philippines
Tel No. +632 636-5411
Fax No. +632 635-4632
Website: www.colfinancial.com
Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside
of the COL Financial website as these may be subject to tampering or unauthorized alterations.
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