MAEOY - Manila Electric: Regulatory Uncertainties Overshadow Diversification Into Power Generation Business
Elevator Pitch
Philippines-listed electric utility Manila Electric Company (MAEOY) [MER:PM] trades at 16.2 times consensus forward FY2020 P/E, on par with its historical five-year average P/E of approximately 17 times. It also offers a consensus forward FY2020 dividend yield of 4.70%.
While a mid-teens P/E multiple seems reasonable for a regulated monopoly that is a proxy for the Philippines' long-term GDP growth and power consumption, there are two key risk factors that make Manila Electric an unattractive investment candidate. Firstly, its core power distribution business could potentially see a significant reduction in distribution tariffs starting