The Bellwether – 113

Releasing the 13th issue of The Bellwether, as published by FMIC's IAG-Research. This is a fortnightly publication on market action and outlook. The following are the highlights of the issue: - Manila Water Company's (MWC) Indonesian Thrust to Contribute

• Manila Water Company’s (MWC) Indonesian Thrust to Contribute 12% of Earnings
• Indonesia Water Venture is the Single Biggest Earnings Impact from Offshore Expansion in 2013
• Manila Electric Company (MER) Likely to Beat 2012 Php15.5bn Profit Guidance
• Outperformance
• Our Optimism is Based on 3Q12 Booking of Under-recoveries.
• Benguet Corporation (BC) Takes over Nickel Mining - Earnings Rise on Record Gold Prices and Output Ramp-Up

Manila Water Company’s (MWC) Indonesian Thrust to Contribute 12% of Earnings

Indonesia Water Venture is the Single Biggest Earnings Impact from Offshore Expansion in 2013. Manila Water's Indonesian acquisition, 51% of equity in PT PAM Lyonnaise Jaya (Palyja), will contribute 12% of next year's bottomline, likely to be booked in 2Q2012. Palyja has been operating the water supply concession contract of Western Jakarta since 1997 under a 25-year deal with the government-owned PAM Jaya. The incremental earnings we estimate to be Php600mn, almost doubling the current earnings of Php350mn outside of the concession area--the East Zone--; the latter represents 5% of total earnings. Please see table below for the other water businesses outside of the East Zone.

Manila Electric Company (MER) Likely to Beat 2012 Php15.5bn Profit Guidance

Outperformance. We expect 2012 MER net profits to be above the Php15.5bn guidance. Nine-month earn-ings was reported at Php12.9bn, above last year’s same period’s Php11.6bn.

Our Optimism is Based on 3Q12 Booking of Under-recoveries. Quarter-on-quarter (q-o-q), our initial hunch was that 3Q2012 net profits may turn out better than 2Q2012 due to the booking of underrecoveries in 3Q2012 related to distribution tariffs. However, 3Q2012 actual results saw a drop q-o-q from Php6.38bn to Php3.15bn. The underrecoveries booking will offset the seasonally weak 3Q energy sales due to the cooler weather and rains/typhoons.

Benguet Corporation (BC) Takes over Nickel Mining

Earnings Rise on Record Gold Prices and Output Ramp-Up. BC sees a 75% improvement in core mining net profits to Php700mn in 2013 from this year's ex-pected Php400mn. This forecast does not include the Balatoc Gold tailings' anticipated Php800mn-Php1bn topline in 2013 on which the company was mum about. BC, the country's fourth largest primary gold producer in 1H2012, is riding the gold price bull run.