Aboitiz Power Corp.

AP [PSE]
First Metro Rating Last Price Intrinsic Value Industry Sector
Buy 19.18 25.74 Power Generation & Distribution Utilities

WESM Eases, Hits AP’s Merchant Capacity. When 16% of its total 2,089MW attributable capacity or 352MW.
the super hot summer months set in, no one thought it Incremental dispatch of 222GwH by the oil plants in 2Q
Easing WESM
would do the opposite of the expected: cut spot prices more than offset the 136 Gwh fall in the sales volume of
Cools Down AP; at WESM in 2Q10. Behind the price slide was the Pagbilao and Tiwi-Macban, as the former underwent a
Power Supply Gap overwhelming effect of some 1,000MW of Luzon grid’s preventive maintenance for 1 month in 2Q.
is Key to Upside generation capacity previously on outage being back c) The hydro’s ancillary/reserve market brought in a 4-fold
on offer at the WESM, even as peak power demand hike in EBITDA to PHP941m in 1H2010 despite El Nino
Call Report rose 10% to 7,529MW in 1H2010 year-on-year. While as the mechanics of the reserve market made Magat and
1H2010 Operating Results
Analyst Briefing
a lower ave. spot price in 2Q, 18% down to PHP6.40/ Binga’s record low load factors less relevant to profitability.
Aug. 6, 2010 kwh quarter-on-quarter (qoq), hit 25% of AP’s 5bn kwh AP’s Magat is able to contract power (capacity-based) with
By: C.S. Ulang merchant (WESM) sales in 1H2010 and did two things the National Grid Corp. (NGCP) without releasing water
Analyst to incomes, (shaved 2Q EBITDA by 12% to PHP8.9bn from its dams at PHP4.43/kwh (256Gwh) and at the same
qoq and cut net income 28% to PHP5.3bn qoq), AP’s time sell spot (83GwH) at peak prices of PHP11-12/kwh.
Report updated on Aug. 13, 2010
1H2010 net income was still ahead 7-fold to Php12.7bn
Power Gap Hold Key to Upside. We are maintaining
yoy. Please see Table 2 for EBITDA analysis per plant.
our full year forecast of PHP20bn in 2010, which is 66%
AP’s sensitivity to WESM prices (its merchant risk) was achieved by AP’s 1H results. We expect 3Q10 and 4Q10
revealed by weak 2Q cash flow despite a 6% hike in net incomes to be lower than 1H10 with the onset of the
total energy sold in 2Q to 2.5bn kwh qoq. Boosting wet season. WESM prices have further dropped to Php4/
Stock Data
energy sales were: a) New capacities in 2Q-- plant B kwh in July. Pagbilao, half of which, is merchant will burn
Price 19.18
26MW of the 42.5MW Sibulan Hydro and Unit 1,with expensive coal in 2H2010 costing Php2.30/kwh vs. lower
Market Cap (PHP m) 141,138
Shares Outstanding (m) 7,359 122MW of 246MW Cebu Energy Dev’t Corp., with a WESM, thus squeezing margin. Pls. see forecast below.
Book Value/share (PHP) 5.69 combined 52m kwh attributable energy sales in 2Q; Ancillary, likewise, will see lower prices as it is WESM-
Price/book (x) 3.37
b) Mindanao’s power shortage of 580MW/day led a driven, as well as a quarter of Tiwi’s merchant capacity.
Fundamental Indicators 78% jump in the oil-based plants’ sales (attributable), With peak demand in Luzon at 7,500MW and reserve
2008A 2009A 2010E with dispatch at an ave. high of 70% in 1H2010 vs. margin thin at 400MW on top of current 7600MW power
Sales (PHP m) 12,243 23,174 55,028
43% yoy. AP’s oil plants’ footprint in Mindanao is supply, we see AP’s new capacities to benefit from the
Net Profit (PHP m) 4,424 5,657 19,555
EPS (PHP) 0.59 0.76 2.65
peaking energy demand of the
PER (x) 6.44 11.79 7.23 local economic recovery.
From Unrevised Bloomberg Earnings
Consensus Estimates Valuation. Our revised DCF
places AP’s intrinsic value at a
higher PHP26/shr. vs. our earlier
valuation of PHP20.00/shr. The
current price is a 36% discount
to NAV. On the other hand, 2010
PE is 7.5. We rate AP still a buy.
Aboitiz Power Corp. AP [PSE]
2009 Sales Php Mn Mkt Cap Php Mn Industry Sector
Php 23,174 Php147,172 Power Generation & Dist’n Utilities

The company was incorporated on February 13, 1998 as a holding company First Metro Rating Last Price NAV Transparency and Governance Competitive Edge
for the Aboitiz Group’s investments in power generation and distribution. With Buy Php19.18 Php25.74
investments in power generation and distribution companies throughout the 8.90 20.40 Annual Price High Php
Philippines, the Aboitiz Group is considered one of the leading Filipino-owned 3.25 8.60 Low
companies in the power industry. 2009 Ytd 2010

PRICE VOLATILITY

19.18 52 week High/Low Php

20.50-5.40

Since IPO High/Low Php

20.40-3.25
69
Relative Strentgh Index
to PSEi

139.6 Trading Volume Mn

Growth Rates 2006 2007 2008 2009 7/30/2010 STOCK PERFORMANCE

2008 2007 2006 --- 3.77 (8.62) 130.89 140.00 Total Return %
Revenue % 8.23 30.31 7.80 46.01 23.76 (46.29) 63.33 15.48 +/- Market
Operating Income % (16.68) 58.37 (11.68) 0 0 0 4.74 1.50 Dividend Yield %
Earnings/share % (10.61) 78.38 (24.49) --- 39,000 27,963 47,095 88,303 Market Cap Php Mn
Book Value/Share % 12.77 109.51 11.52
Stock Total Return % (8.62) 3.77 n.a. 2005 2006 2007 2008 2009 FINANCIALS
+/- Market (46.29) 23.76 46.01 7,976.1 8,616.74 11,209.9 12,108 12,466 Distn/Generation Php Mn
76.56 64.27 102.1 134.57 10,734 Other Revenue Php Mn
8,052.7 8,681 11,312 12,243 23,174 Total Revenues Php Mn
2,443.81 1,849.6 4,138.44 4,424.33 5,657 Net Income Php Mn (common)
Profitability Analysis Current 5 Yr Average Ind. Mkt. 0.49 0.37 0.66 0.59 0.77 Earnings per Share
T12mo ROE % 35.81 25.47 20.80 18.33 761 896 0 1,325 1,472 Dividends Php Mn
Return on Assets % 15.18 10.77 7.77 5.66 2,000 5,400 7,358 7,359 7,359 Shares Mn
Operating Margin % 48.89 25.14 32.92 19.06 1.55 1.73 3.63 4.10 4.69 Book Value per Share
Net Margin % 44.75 34.90 39.15 20.88 11,521 12,345 36,162 47,272 111,341 Assets Php Mn
7,776 8,672 27,023 30,692 35,047 Total Equity Php Mn

2005 2006 2007 2008 2009 PROFITABILITY

Financial Position 12-09 Php Mn 12-08 Php Mn --- 15.5 17.15 13.39 9.62 Return on Assets %
Cash & Cash Equivalents 3,814 14,915 --- 22.49 23.5 15.23 16.22 Return on Equity %
Receivables 3,606 1,991 --- 21.31 36.78 35.4 34.52 Net Margin %
Other Current Assets 1,383 501 --- 0.73 0.47 0.29 0.33 Asset Turnover
Property and Equipment 72,911 6,267 ---
Other Long-term Assets 28,510 23,261
Total Long-term Assets 101,426 29,532 2005 2006 2007 2008 2009 FINANCIAL HEALTH
Total Assets 111,341 47,272 237 146 3,404 4,854 8,240 Short-Term Liab.
Current Liabilities 14,656 8,090 1,326 1,052 1,073 6,758 59,714 Long-term Debt
Long-term Borrowing 59,714 6,758
Total Liabilities 76,294 16,580 2005 2006 2007 2008 Current VALUATION
Total Equity 35,047 30,692 --- --- 9.42 6.44 15.58 Price/T12moEPS
--- --- 3.46 2.28 5.11 Price/T12moSales/shr.
--- --- 1.44 0.93 2.92 Price/Book

Quarterly Results Global Peers by Market Cap
Revenue Php Mn Dec.-08 Mar-09 Jun-09 Sept.-09 Name Mkt. Cap Trailing 12M P/E ROE
Most Recent Period 12,242 12,168 13,597 16,773 US$mn Rev $mn

Valuation Analysis Current

Ind. Mkt. Prior Year Period n.a. n.a. 12,150 12,469 Pha Lai Thermal Power JSC 28,750 236 11.13 (5.86)
Sarawak Energy Bhd Berhad 44,890 401 12.04 10.09
Price /T12moEPS 11.54 12.87 11.87 Zhejiang Electric Power Co. 920,580 1,025 11.57 0.29
EV/T12moEBITDA 13.78 9.87 n.a. Revenue Growth % Dec.-08 Mar.-09 Jun-09 Sept.-09
Anhui Wenergy Co., Ltd 43,700 404 148.79 0.94
Price/T12moCash Flow 15.69 8.41 8.89 Most Recent Period n.a. n.a. 11.91 34.52
Prior Year Period n.a. n.a. n.a. n.a. Top Common Stockholders In 000 % to Total OS
Dividend Yield % 1.50 1.41 3.17
Shares Capital Stock
Price/Book 2.92 2.25 2.15 Name
Price/ T12mo Sales/shr. 3.99 2.09 2.34 Earnings Per Share Php Dec.-08 Mar.-09 Jun-09 Sept.-09 Aboitiz Equity Ventures, Inc. 5,569,684 75.69%
Most Recent Period 0.59 0.50 0.53 0.68 HSBC - Clients’ Account 397,485 5.40%
Prior Year Period n.a. n.a. 0.70 0.68 ATR KimEng - Clients’ Account 212,035 2.88%
Aboitiz Land, Inc. 151,113 2.05%
Others 1,028,229 13.98%
Total 7,358,546 100.00%

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