J.P. 摩根-亚太地区-能源与公用事业行业-菲律宾能源与公用事业行业策略分析-2019.3.28-41页.pdf

Asia Pacific Equity Research28 March 2019Equity Ratings and Price TargetsMkt CapPriceRatingPrice TargetCompanyTicker($mn)CCYPriceCurPrevCurEnd DatePrevEnd DateSemirara Mining and Power CorpSCC PM1,773.96PHP21.95OWn/c25.00Jun-20n/cn/cManila Electric CompanyMER PM8,113.47PHP378.60Nn/c350.00Jun-20325.00Jun-19Metro Pacific Investments Corp.MPI PM2,869.83PHP4.79OWn/c6.50Jun-208.00Jun-19Aboitiz PowerAP PM4,924.95PHP35.20NUW31.00Jun-2030.00Dec-19Source:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 28 Mar 19.Philippine Power&UtilitiesSemirara our Top Pick on 20E EPS recovery,yield;MPI compelling but lacks catalysts;u/g AP to NeutralPhilippinesASEAN Head of ResearchAjay Mirchandani AC(65)6882-Bloomberg JPMA MIRCHANDANI J.P.Morgan Securities Singapore Private LimitedJelline Gaza,CFA(63-2)878 J.P.Morgan Securities Philippines,Inc.Jeanette Yutan(63-2)878-J.P.Morgan Securities Philippines,Inc.See page 36 for analyst certification and important disclosures,including non-US analyst disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.The PH Power&Utilities space has continued to underperform PSE year to date(3-12%)with only MPI PM&MER PM generating positive returns in 19E so far.While we see(a)large power supply addition in 19E&20E(4 GW),and(b)continued regulatory delays(on MER PSAs&Meralco tariff adjustments)as overhangs,on a positive note(i)valuations(for MPI,AP&SCC)have de-rated to 8-11x with 3-6%dvd yield versus 13-18x P/E multiples seen in 2016 with(ii)limited power addition beyond 20E limiting prolonged pain&(iii)15-20%20E EPS growth(for SCC&AP).Semirara(SCC PM):its time to buy on(a)20E earnings recovery&(b)6%yield;reiterate OW:We recently upgraded SCC PM to OW(see link)in spite of JPM being 13/22%below FY19E/20E consensus as we see(a)earnings recovery into 20E on coal plant rehabilitation completion,(b)compelling valuations(7x 20E P/E)and 18%20E FCF yield.Metro Pacific(MPI PM):Lacking catalysts but remains attractive franchise with compelling valuations;retain OW with PT of Php6.5:While we cut FY19-20 EPS by 15-20%(largely driven by estimated increased interest costs),MPI PM still trades at 50%discount to NAV with MPI(ex-MER stake 25%discount)imputing zero value for rest of business.Ironically while we have seen progress on water tariff adjustment(in 4Q18)&NLEX toll hike(in 1Q19)contributing Php1.5 bn to 20E income(11%),stock remains range-bound.Any asset crystallization with slowdown or delay of Php47 bn 3-year capex can be positive catalysts.Meralco(MER PM):expensive but 4%yield with$1.2 bn net cash;marginal EPS reduction:As MER PM continues to provide annually Php11-13 bn per year as it remains conservative on regulators likelihood of lowering tariffs(delayed for 4 years and is likely to be lower given potential of lower allowed returns in next reset).However with a net cash B/S($1.2 bn i.e.15%of market cap),4%yield and limited progress on tariff reset(in our view),MER PM continues to behave as a relative safe haven stock.Stay Neutral.Aboitiz Power:upgrade to Neutral with(a)40%capacity growth over 2 years,(b)10 x P/E with 5%yield&(c)limited system capacity add beyond 20E:While we remain 13-14%below consensus,we see sizeable capacity addition in 19E/20E(65-70%of which is contracted)help support earnings inspite of our concerns on spot prices into 2H19.With stock now at 10 x FY20E P/E&5%yield,we see downside support.2Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Philippine Power Table 1:Earnings estimate changesFY19EFY20ENet Income(mn Php)NewOld%ChangeConsensus%diff.vs ConNewOld%ChangeConsensus%diff.vs ConAP PM21,63022,689-4.7%25,043-13.6%24,626NA28,387-13.2%MPI PM13,04615,382-15.2%14,915-12.5%13,52617,137-21.1%15,183-10.9%MER PM21,59521,820-1.0%21,720-0.6%23,37923,730-1.5%21,2689.9%SCC PM10,05310,0530.0%12,958-22.4%12,81512,8150.0%14,688-12.8%Source:J.P.Morgan estimates,Bloomberg.Sparse water inflow,El Nio-driven keep spot elevated in 1H19 but likely to normalize lower in 2H19 on new capacityDespite the slump in oil prices,spot power prices were up 19-34%so far into 1Q19.We think this is driven by supply tightness due to the govt.s decision to move planned outages ahead of the May elections,exacerbated by unexpected shutdown of older plants.There could be short-term price support in 1H19 in light of the El Nio phenomenon(low hydro availability)and seasonally high energy demand during the dry season(April-June).The local weather bureau warns of lower than normal rainfall and slight delay in the onset of rainy season to June.Figure 1:Spot prices to hit 5Y high in 2019s dry seasonPhp/kWhSource:AP Trading Team,PEMC.Figure 2:Below the rule curve water in Magat,Ambuklao-Binga dams Water level in meters,Power capacity in MWSource:Company data,PAGASA(March 24,2019 elevation data).Elevated new supply until 2020E,but mostly contractedSpot prices will likely remain depressed post El Nio episode,in our view,given 4,100MW of new generating capacity in 2019E-20E,80%of which are coal-fired power plants.Factoring in dependability and mid-year completion,we expect 3,316MW of fresh power supply,eclipsing 1,430MW of incremental demand in the next 2Y.Aboitiz Power is the most aggressive in terms of capacity additions(1,080 attributable MW),followed by AC Energy(750MW)and San Miguel(450MW).6.024.844.435.045.151Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q181Q19PeakOff PeakAll Hours360 345 245 218 132(15.9)16.0(5.1)3.9 1.0 0100200300400MagatSan RoqueAmbuklao-BingaAngatPantabanganCapacity of Hydroelectric Plant(MW)Deviation from Rule Curve(m)Near-term spot price support amid El Nio3Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Figure 3:Incremental demand*vs.incremental supplySource:PH Dept.of Energy(DOE),J.P.Morgan estimates.*Defined as incremental non-coincidental peak demand;assumes 4.8%demand growth.Assumes completion of committed power projects by mid-year and historical dependable factor per fuel type;we considered Calacas rehab in 2019E incremental supply.We excluded the stranded Meralco PSAs in this analysis.Decent contracted level for upcoming baseload capacityWe notice that 60%of upcoming large baseload power plants have substantially contracted their capacity.Key plants that have yet to secure contracts include Energy Worlds combined cycle natgas plant(650MW),APs GNPower Dinginin Unit 2(600MW),and half of ACEnergys GNP Kauswagan(300MW).Refer to Table 2.Table 2:Key Upcoming Capacity(2019-2023)In MW*Facility NameMother/JV CompanyCapacity(MW)Target Date ofCommercial operationContracting StatusLuzonLimay CPP Ph2-U4SMC Global Power150Feb-19“contracted with DUs industrial clients”Masinloc Expansion U3SMC Global Power300Mar-19“substantially contracted”GNPower Dinginin U1AP(70%)/ACEnergy(30%)600Nov-19100%San BuenaventuraMeralco(51%)/EGCO(49%)500Sep-19100%Energy World Combined Cycle GasEnergy World Corp.6502020Will be merchant plantGNPower Dinginin U2AP(70%)/ACEnergy(30%)600Jun-200%Atimonan One CPP U1Meralco6002022100%but pending approvalAtimonan One CPP U2Meralco6002023100%but pending approvalVisayasTherma Visayas Energy U1-2Aboitiz Power(80%)/Vivant(20%)300 Apr-19/Jul-19100%Palm Concepcion CPP U2A Brown Company Inc.135 2019n.a.MindanaoSarangani Energy CFPS U2Alsons Power Corp.100 Feb-19n.a.GNPower Kauswagan CFPPACEnergy(85%)/Power Partners(15%)600 Aug-1950%Source:DOE,Company disclosures.*All coal-fired power plants except Energy Worlds 650MW plant.Meralco PSA approval delays to benefit San Miguel,Aboitiz PowerThe expected expiry of Meralcos supply contracts this year used to be a potential key driver to heightened competition among gencos.Risk from this has dissipated,in our view,as the protracted delays in regulatory approval of Meralcos power supply agreements(PSAs)prompted extension of 2,460MW worth of contracts due to expire this year,benefitting Aboitiz Power(350MW)and San Miguel(2,110MW);see Figure 5.We think unceasing public scrutiny fuels regulators inaction on the stranded PSAs.The PSAs will be extended for another year with no change in terms(vs.3 years allowed by the contract).The ERC may review the need to transition to CSP 517 391 1,059 517 689 698 732 768 806 846 283 530 1,733 2,043 1,133 1,445 1,931 615 22 26 05001,0001,5002,0002,50020142015201620172018E2019E2020E2021E2022E2023EIncremental DemandIncremental SupplyMER to extend 2,460MW of expiring contracts,a plus for SMC,AP4Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-(competitive selection process).Recall that cases on CSP rules are still being heard at the Supreme Court,a key provision of which caps PSA extensions to one year.Figure 4:Capacity Contracted to MeralcoIn MW/%of total beneficial capacitySource:Company data,J.P.Morgan estimates.*Exposure of SCC relates to MERs RES.Figure 5:Delays in PSA approval prompted MER to renew contracts with AP,SMCSource:Company data.*Note:420MW Calaca was recontracted with Meralco RES.No sizeable capacity addition beyond 2020E Our tally of committed projects suggests that 2020 could be the last year we could see 1,800MW p.a.of capacity build-up.No major committed power plant with approved PSA is scheduled for completion after 2020.We flag key risks to this:(1)approval of Meralcos stranded PSAs(e.g.2x600MW Atimonan One is still slated for 2022/23 completion),(2)fruition of integrated LNG terminals being pushed by the Philippine govt(i.e.Dennis Uy,CNOOC Gas eyes a 2,000-3,000MW adjacent power plant complex for its LNG terminal proposal),and(3)more aggressive build up in solar power(Solar Philippines indicated desire to build 5,000MW of capacity).2,110 1,914 350 420 51%70%11%54%0%20%40%60%80%100%05001,0001,5002,0002,500SMCFGENAPSCCExposure to Meralco(MW)As a%of capacity5Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Figure 6:No new big-ticket capacity additions starting 2021E due to lacking permits Source:PH Dept.of Energy(DOE),J.P.Morgan estimates.2,667 1,418 922 2,812 1,287 11 42 21 05001,0001,5002,0002,5003,000201620172018E2019E2020E2021E2022E2023ECoalOil-basedNatural gasRenewable2019 and 2020 could still see sizeable capacity additions but supply risk could dissipate starting 20216Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Semirara:Keep OW on coal price recovery,power asset upgrade and dividend yield supportSemirara is our top pick in the sector.We think the 40%drop from its 2018 peak more than priced-in the operational concerns on power.The stock is currently trading at trough valuations(both in P/E and EV/EBITDA bases)despite our lower-than-Street earnings estimates(lower by 22%/13%on 2019E/20E).In the near term,we think it stands to benefit from the recovery on low-grade coal prices.As investors start to look into 2020E earnings,SCC offers an earnings growth of 27%y/y,driven by the completion of the Calaca life extension works and decent 12%y/y gr.in coal profit(flat ASP;4%volume growth).Dividend yield on regular DPS alone(5.5%/5.7%in 2019E/20E)remains the highest in our Philippine coverage.Low calorific coal price support into 2019The lifting of Chinas import restrictions that started mid-Nov.2018 and stricter safety checks for Chinese onshore coal mines(post-series of accidents)led to a 26%-32%YTD price recovery of low-to mid-cv Indonesian coal YTD(See Sumedh Samants outlook here).This,along with 2mn MT of beginning inventory at the start of the year,could provide q/q earnings recovery in coal segment by 1Q19.Coal segment now accounts for 80%of 2020E earnings.Profit is most sensitive to coal prices(every 5%change=14%/11%change in 2019-20E bottom line).Figure 7:Weak coal prices drove SCCs stock in 2018 could it trace a path of recovery in 2019?US$/MT and Php/shareSource:IHS Energy,Bloomberg,Company data.Calaca upgrade to pave way for earnings recovery into 2020EWhile investors remain skeptical of this view,we believe the Calaca rehab(2x300MW)could have lower execution risk vs.what SCC have experienced in Southwest Luzon(2x150MW)given that it is not a greenfield project and of different make(not Chinese equipment).To add,the rehab works are covered by insurance where SCC can recoup liquidating damages in case of delays.Attractive dividend yield at trough valuationsAt current price,SCC is trading at a 10Y trough multiple for both fwd.P/E(7.6x 2020E)and EV/EBITDA(4.9x),even on our lower-than-Street earnings estimates Figure 11.It also trades at lower multiples relative to regional peer average having entirely missed the YTD rally enjoyed by its regional comps.Semirara also offers a decent 5.7%2020E dividend yield on regular DPS alone,the highest in our Philippine coverage.With full operations of revamped Calaca power plant next year,balance sheet could turn into net cash position by 2022E.152025303540453035404550556065Avg Indo 4200kc GAR and 4700kc NARSemirara 4300 kc GARSCC Stock Price26-32%YTD recovery in low-mid CV Indonesian coalFigure 8:Dividend Plays in PHSource:Bloomberg,J.P.Morgan estimates.Prices as of March 27,2019.3.1%4.0%4.0%4.0%4.1%4.1%4.7%4.9%5.0%5.7%CEBMWCDMCFLITELMERGLOAPSHLPHSCC7Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Figure 9:JPMe Earnings Forecast per Segment(Phpbn)Source:Company reports and J.P.Morgan estimates.Figure 10:Indo low CV pricesSource:Bloomberg.Figure 11:SCC trades at a 10Y trough fwd.P/E and EV/EBITDASource:Bloomberg.See our full note on our Semirara upgrade to OW here.1.65.05.07.59.09.79.110.210.25.91.93.24.85.42.31.02.62.87.56.98.512.014.212.010.112.813.003691215182013201420152016201720182019E2020E2021ECoalPower8Asia Pacific Equity Research28 March 2019Ajay Mirchandani(65)6882-Table 3:SCC quarterly earnings recap:4Q18 vs.4Q17 vs.3Q18Php in millions4Q184Q17%y/y3Q18%q/qFY18EFY17A%y/yFY19EFY20ERevenues11,101 12,011-8%6,910 61%41,969 43,943-4%41,210 46,604 Coal 7,944 8,646-8%4,121 93%30,696 29,668 3%33,076 34,327 Power5,585 5,556 1%5,071 10%18,777 20,516-8%13,200 19,403 Less:Intersegment sales(2,428)(2,191)11%(2,282)6%(7,504)(6,241)20%(5,067)(7,125)Cost of sales(6,104)(6,390)-4%(4,579)33%(20,840)(20,333)2%(22,665)(23,671)Coal(4,653)(4,789)-3%(3,425)36%(15,868)(15,141)5%(18,500)(18,628)Power(3,754)(3,727)1%(3,481)8%(12,510)(11,313)11%(9,232)(12,168)Less:Intersegment elim2,303 2,126 8%2,327-1%7,538 6,121 23%5,067 7,125 Gross profit4,997 5,621-11%2,331 114%21,129 23,610-11%18,545 22,933 Coal3,291 3,857-15%696 373%14,828 14,527 2%14,577 15,698 Power1,831 1,829 0%1,590 15%6,267 9,203-32%3,968 7,235 Less:Intersegment elim(125)(65)91%45 nm34(120)nm0 0 Coal gross margins(Php/MT)9951,183-16%490103%1,2781,10915%1,1351,174Power gross margins(Php/kWh)1.231.36-10%1.202%1.361.78-24%1.091.44Opex(1,898)(3,281)-42%(1,033)84%(7,775)(8,207)-5%(7,285)(7,750)EBIT3,099 2,339 32%1,2