Manila Water continues slide amid regulatory uncertainty

AYALA-LED Manila Water Company, Inc. was one of the most actively traded issues last week as investors bet on the future of the concession agreements of the country’s two largest water companies.

A total of 356.51 million shares of Manila Water worth P2.44 billion exchanged hands on the trading floor from Dec. 16 to 20, making it the fifth-most traded stock in the local bourse, the Philippine Stock Exchange data showed.

Manila Water dipped by 25.7% on a week-on-week basis to P7.44 per share last Friday from P10.02 apiece on Dec. 13. Meanwhile, it went down by 72.1% since the start of the year.

“Investors have been speculating on the future of the concession agreement of both Manila Water and Maynilad Water Services, Inc.,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in an e-mail interview last Friday.

Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. said that Manila Water caught the investors’ attention following President Rodrigo R. Duterte’s tirades against the two water concessionaires earlier this month.

“The uncertainties that arose out of the issue have jolted investors, pushing them to the sell side,” Mr. Calaycay said in a text message last Friday.

“However, an easing of the concerns with hints of assurances from regulators for at least a renegotiation of the agreements gave long term and even speculators something to look forward to,” he added.

Last Dec. 3, Mr. Duterte threatened to file economic sabotage cases against Manila Water and Maynilad over supposed onerous provisions in their contracts with the government.

Justice Secretary Menardo I. Guevarra said last Wednesday that the government is targeting to finish its version of the revised contracts for the water companies before the end of December.

The Metropolitan Waterworks and Sewerage System’s administrator said in a statement last Friday that it had given the two water concessionaires a chance to renegotiate new terms of their contract with the government.

Manila Water’s concession covers the east zone of Metro Manila, which includes Makati, Mandaluyong, Pasig, Pateros, San Juan, Taguig, Marikina, most parts of Quezon City, portions of Manila, as well as the following towns of Rizal: Angono, Antipolo, Baras, Binangonan, Cainta, Cardona, Jala-Jala, Morong, Pililia, Rodriguez, San Mateo, Tanay, Taytay, and Teresa.

Manila Water revenues climbed 15.4% to P5.60 billion in the third quarter, bringing the nine-month top line to P16.14 billion, up 10.1% from year-ago levels.

Meanwhile, Manila Water’s attributable net income during the July-September period rose 8.7% to P1.49 billion. Year to date, however, it declined 10.6% to P4.41 billion.

Philstock’s Mr. Calaycay said “clearing up of the concession agreement” remains a crucial driver of its income growth.

“The company fundamentals are okay, but given that the concession is the primary driver, it held sentiments hostage. [This means] the fate of [its] share price and the company insofar as the market is concerned hinges on day-by-day developments on how the concession agreement talks progress,” he said.

“Things were going quite well for the company until this issue came up and changed the picture,” Mr. Calaycay added.

Meanwhile, Regina Capital’s Mr. Limlingan has revised the full-year estimate on Manila Water’s net income to reach P5.8 billion in 2019 as operating expenses nearly doubled on a quarter-on-quarter basis.

This week, Mr. Limlingan placed the stock’s support and resistance levels at P6.60 and P8.00, respectively.

For Mr. Calaycay, he said that Manila Water will be priced on a “day to day basis” depending on the developments on its concession agreement talks.

He gave its initial support at P6.90-P7.20 and resistance at around P7.50-P7.70. — E. C. Aruta, Jr.