The entry of one of the country’s billionaires into Metro Manila east zone water concessionaire signals a “more positive outcome” on the terms of the new contract to be sealed by the latter with the government.
Online stockbrokerage firm Colfinancial.com said the entry of Enrique Razon in Manila Water Co. Inc. also increases investors’ confidence on Manila Water given that his Prime Metroline Infrastructure Holdings, Inc. is also the proponent of the Wawa Dam project.
“Recall that the Wawa Dam project will augment the water source of Metro Manila, which will in turn alleviate water supply issues for water firms,” Colfinancial said.
“Moreover, management is optimistic that Mr. Razon’s extensive global experience through port operations would open more opportunities for the company outside the country and his experience in dealing with regulated businesses would be beneficial to Manila Water,” it added.
Last week, Razon’s Prime Metroline Holdings Inc. bought 820 million primary shares of Manila Water, equivalent to a 25 percent stake in the company, worth P10.7 billion.
Razon will be hold a 51 percent voting rights in Manila Water after previous majority owner Ayala Corp. ceded parts of its voting rights.
Razon’s acquisition has diluted the Ayala Group’s stake in Manila Water to 38.5 percent from the previous 43 percent. The transfer of proxy rights to Razon meanwhile reduced the Ayala Group’s voting power to just 31.65 percent “effectively giving up control over Manila Water,” noted Colfinancial.com.
Colfinancial.com said the capital infusion of Razon will strengthen Manila Water’s balance sheet and will “allow it to pursue strategic initiatives.”
“This will also ease funding pressure on the company. Recall that given the uncertainties currently surrounding water firms, concerns were raised that Manila Water might have difficulty in rolling over its debt or obtaining new loans,” it said.
“Note that Manila Water currently has P50.4 billion in total debt, P10.6. billion of which is maturing this year, with capex that is expected to reach P16.0 billion in 2020,” it added.
Coflnancial.com said the capital infusion will also improve Manila Water’s debt-to-equity ratio 0.70x from from 0.90x.
Mytrade, the online stockbrokerage arm of Abacus Securities Corp., meanwhile said the additional capital will dilute earnings per share (EPS) by 28 percent.
