Metro Pacific Investments Corporation: Construction & Real Estate

THE COMPANY: Metro Pacific Investments Corporation (MPIC) is a Philippine-based unit of the First Pacific Company with interests in power and water utilities, health care, and infrastructure development and management. MPIC was incorporated and registered with the Securities and Exchange Commission in 2006 to serve as a holding company for investments in real estate and infrastructure. MPIC’s major subsidiaries are DMCI-MPIC Water Company and Metro Pacific Tollways Corporation. DMCI-MPIC holds a 92% stake in Maynilad, which has the exclusive water supply concession for the western zone of Metro Manila. Maynilad’s concession zone covers 540 sq km and serves 9.4m people. Metro Pacific Tollways Corporation (MPTC) manages a number of major toll roads, including the North Luzon Expressway, which connects Manila to northern Luzon. MPIC is the dominant toll road operator, accounting for around 67% of total lane km in the Philippines. MPIC’s hospital affiliates operate the country’s largest hospital network, which consists of the Makati Medical Centre, the Cardinal Santos Medical Centre, Davao Doctors Hospital, Riverside Medical Hospital, Our Lady of Lourdes Hospital and Asian Hospital. Beacon Electric Assets Holdings is an MPIC affiliate that owns 45% of the Manila Electric Company (Meralco).

The major shareholder of MPIC is Metro Pacific Holdings (MPHI), which owns 55.6% of the company’s shares. MPHI is a Philippine corporation whose major stockholders are: Enterprise Investment Holdings (60%); Intalink (26.7%); and First Pacific International (13.3%).

BUSINESS PERFORMANCE: For the first nine months of 2011, MPIC posted core income of P3.95bn ($89.67m), up 34% year-on-year (y-o-y). The growth in MPIC core income was driven by improved core incomes from all its portfolio companies, with the exception of MPTC, whose contribution was affected by the expiry of its income tax holiday. Maynilad continues to be the main earnings contributor, accounting for 43% of MPIC’s income, followed by Beacon/Meralco at 28%, MPTC at 26% and its medical businesses at approximately 3%.

The volume of electricity sold by Meralco remained at 22,725 GWh in 2011 as the cooler weather constricted residential demand and as Japan’s natural disasters constrained industrial consumption, despite a slight increase in commercial demand. Still, core income rose by 27% from P9.2bn ($208.84m) to P11.7bn ($265.59m) on the back of a 13% uptick in the average KWh cost and a 3.4% increase in the number of customers, from 4.82m to 4.98m. Meralco increased its efficiency, by lowering system loss from 7.78% to 7.43%.

Maynilad increased the volume of water sold by 7.6%, from 276m cu metres to 297m cu metres, as well as its customer base by 11%, from 874,527 to 973,455. The company’s state-of-the-art Putatan water treatment has paid off; revenues increased by 15%, from P8.9bn ($202.03m) to P10.17bn ($230.86m).

MPTC’s revenue rose 11% from P4.34bn ($98.52m) in the third quarter of 2010 to P4.81bn ($109.19m) in the third quarter of 2011, due to a 12% rise in tariffs, despite a 1% reduction in traffic. MPTC’s core income, however, declined by 4% from P1.1bn ($24.97m) to P1.05bn ($23.84m) during the same period, largely due to its income tax holiday expiring in December 2010.

In the first nine months of 2011, MPIC’s hospital group reported a 32% increase in revenues from P126m ($4.9m) to P166m ($3.77m). In November 2011, MPIC announced that it had reached an agreement with Bumrungrad International for the acquisition of a controlling interest in Asian Hospital, a 219-bed tertiary hospital located in Alabang, south of Manila.

OUTLOOK: There are three key factors that make MPIC an interesting story. Firstly, it owns controlling stakes in businesses which generate stable cash flow and enable it to service debt while aggressively expanding into other industries. Secondly, MPIC actively pursues ambitious projects that will benefit the overall economy. And finally, MPIC’s professional management team has consistently proven that it is able to turn businesses that had previously been in trouble into profit-generating enterprises within a relatively short timeframe.

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