In the past few weeks, we have seen the stock of the water companies go down. Not only that, the parent companies of the said water companies also went down. This is because of the on going debacle about the water contracts that were supposedly unfair to the Filipino people.
The stocks that were affected are:
- Manila Water – MWC
- Maynilad (Private)
- DMCI Holdings (DMC)
- Ayala Corporation (AC)
- Metro Pacific Investment (MPI)
The Issue
The water contract was thought to be unfair by the Duterte administration. Having lost the arbitration case and was asked to pay around P7 billion in fine and damages, the administration fired back and revoked the extension of the water companies. They were supposed to be extented from 2022 up to 2037.
President Duterte warned that he won’t allow the extension of the water companies’ concession rights unless there’s a more favorable deal that is not onesided in favor of the water companies.
The threat of concession rights not being extended alone is enough to send the stock going down for days. Let alone that there are rumors that the government would take over the water companies if push comes to shove.
Nevertheless, we all know and feel that this is a very very scary situation. If you are a shareholder of the companies mentioned, not only does the plummeting stock price scary enough, the thought of future government takeover and further decline because of shrinking earnings or complete shutdown of the company, adds up to the fear.
President Duterte is not new to this kind of action. He did not extend the license of Philweb (WEB) who were a supplier of software products for Lotto outlets. The stock went from 15 to 2. And this experience is enough for investors and shareholders to run from “lightning strike”.
But remember…
With all the fear floating around the market and the affected stocks, as a value investor, you might smell opportunity here. And yes, you are right, I do smell some opportunity. But that is for another post. I’ll make a more detailed analysis on companies that “might” be a good investment. So stay tuned.
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Opportunity indeed! I see MPI as an asset play. Even though Maynilad constitutes a sizable chunk of MPI’s earnings (25%). The recent sell-down is overblown and has depressed MPI’s share price well below its book value. MPI’s 45% stake alone in Meralco is enough reason to purchase this stock since MPI’s current Market Cap is way below the 45% equity stake in MER.
Good luck to the bargain hunters. 🙂
MWC hehe I really don’t have much cash but I’ll add up as soon as it hit a low price. The price now is already good but it might get even better.
What’s your average price now?
You seem very optimistic. What do you think’s the worst that can happen? And were you able to pick up any shares when the stock it ₱6-6.85?