Meralco: MVP group closes in on 50%

From AB Capital's The Opening Bell: Three Moves

Event

SMGP is selling 3.77m MER shares (0.33%) to Manuel V. Pangilinan personally at P580.99/sh, or P2.19 billion. This follows last week's P12.4 billion sale to MPIC, bringing the MVP group's combined stake to 49.7% and SMGP's to 1.9%.

View

The two transactions bring the MVP group to just below the 50% mandatory tender offer threshold, with MPIC at 49.4% and MVP personally at 0.34%. More importantly, the group is paying around 40% above MER's current market price, signaling strong conviction in the strategic value of its stake and suggesting the market may be undervaluing MER.

Catalyst

The remaining 1.9% SMGP stake leaves further scope for ownership changes, which could provide another reference point for MER's valuation. Meanwhile, SMGP is looking to redeploy proceeds toward renewable energy projects.

Action

We have an Outperform rating on MER. The transactions reinforce MVP's long-term commitment to the utility and provide a useful valuation anchor. In our view, this is a positive sentiment signal but not an earnings catalyst, with the rate reset and clarity on system-loss recovery still key to rerating.

Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.