ABOITIZPOWER (AP) Corp.’s outlook has remained to be attractive even after its recent removal from the Philippine Stock Exchange index (PSEi) after its free float level fell below the 20 percent minimum requirement for index members.
COL researchers said in a research note released on Monday that AP’s removal from the PSEi index is indeed disappointing as this would immediately lead to the stock’s derating given the reduction in the number of funds buying the stock. However, the said development will have no impact on its profitability and earnings outlook.
“AP’s outlook remains very attractive as the company plans to add 962 megawatt (MW) of attributable capacity from the second half of this year until the end of 2026. This is equivalent to ~ 20 percent of its existing attributable capacity,” COL researchers pointed out in their monthly COLing the Shots research, led by chief equity strategist April Tan.
The increase will come from renewable energy plants, mostly solar plants. The said expansion is also part of AP’s commitment to deliver 3,700MW of additional renewable energy capacity by 2030, bringing the share of renewable energy plants to 50 percent of its attributable capacity as part of its de-carbonization initiative. After factoring in the new plants, COL analyst George Ching increased his fair value estimate on AP from P48.27 per share (/sh) to P50/sh.
Given the size of its market capitalization, AP can also be easily added back to the index if it eventually decides to sell some of its treasury shares to actively managed funds that want to capitalize on the company’s improving fundamentals.
Aside from AP, infrastructure giant Metro Pacific Investments Corporation (MPIC) was also removed from the local stock barometer. MPIC’s public float dropped to 2.78 percent, following its delisting and high acceptance rate of its P28.4-billion tender offer. MPIC is set to delist from the local bourse in October.
Presently, there is speculation that AP’s major shareholders might want to take the company private.
This as AP might have intentionally reduced its public float to bring its share price lower, allowing the company or its major shareholders to buy shares owned by the public at a much lower price.
However, according to COL analysts, there are compelling reasons why speculation regarding AP’s privatization might not be true.
Under the Electric Power Industry Reform Act or EPIRA, power generation companies and distribution utilities are mandated to offer or sell to the public at least 15 percent of their common stock.
Moreover, according to news reports, AP was quoted as saying that it has no intentions to delist from the PSE and that its current public ownership level (of more than 19 percent) far exceeds the 10 percent minimum public ownership requirement. AP also continues to buy back shares.
“If AP’s objective for reducing its public float was to bring down its share price, the company should have suspended its share buyback program. However, the very next day after the PSE announced AP’s removal from the index (September 21), the company bought back a total of 27.6 million shares,” COL analysts said in the research note.
The PSEi is composed of the country’s 30 big companies, whose selection is based on specific criteria. It provides a snapshot of the market’s overall condition by gauging changes in the stock prices of these select listed companies. / CSL