PLDT projects P9-B net income

Telecommunications leader Philippine Long Distance Telephone Co. (PLDT) is projecting net income for the whole of 2003 to reach P9 billion, after provisioning which is expected to be minimal, according to company president and CEO Manuel Pangilinan.

Pangilinan gave this rosy projection during a recently held international non-deal roadshow that highlighted the strong performance of the firm, as well as the improving investment opportunities in the Philippines.

In 2002, PLDT net income reached only P3.12 billion after the company wrote down its investments in wireless subsidiary Pilipino Telephone Inc. (Piltel). Before the writedown, net income was at P7.23 billion.

The roadshow was aimed at updating investors and shareholders about developments in the company’s strategic initiatives. PLDT generated a high level of interest among the many foreign investment groups that attended the event. The international roadshow of PLDT was held in Hong Kong, Singapore, Europe and United States.

During the occasion, investors pointed out that PLDT was still the most liquid stock in the Philippine market and that they were impressed with PLDT management’s discipline in keeping with its strategy of strengthening its fixed line business and growing its wireless business.

Investment bankers meanwhile believe PLDT’s improving performance is reflective of the company’s success in executing its deleveraging exercise, right-sizing initiatives, as well as the spectacular growth of wholly-owned subsidiary Smart Communications Inc.

"We are pleased with the positive outlook the international investing community gave PLDT. We remain optimistic that as we continue to strictly follow our strategy coupled with a strong emphasis on financial transparency and corporate governance, PLDT shall be at the forefront of the publics mind as a company worth investing in," Pangilinan said.

PLDT’s share price has been moving up over the last few months and has experienced an increase of over 200 percent from a low of P250 per share sometime last year. Furthermore, analysts have increased the target price of the company’s share price to over P750 per share moving forward.

The international non-deal roadshow was spearheaded by investment analyst group UBS with over 50 international investment banks and fund managers participating.

The PLDT management team was headed by Pangilinan, Smart president and PLDT board member Napoleon Nazareno, PLDT chief financial advisor Chris Young, and Smart’s marketing head, Boy Martirez.

UBS Investment Research, in its latest report, projected PLDT’s net income for the year to reach P12.39 billion, before provisioning compared to P7.32 billion last year. The group likewise has estimated 2004 and 2005 earnings before provisioning to increase to P14.9 billion and P14.06 billion, respectively.

Revenues this year is projected to hit P92.5 billion compared to P80.2 billion last year and P100.7 billion next year and P107 billion in 2005. Earnings before interest, taxes, depreciation and amortization (EBITDA) in 2003 is seen reaching P52.5 billion as against P44.9 billion last year.

UBS has rated PLDT a Buy 1, noting that positive earnings and cashflow momentum bode well for PLDT’s develeraging strategy. The analyst group estimates that the company would be able to pay $1.3 billion or 50 percent of its parent debt over the next four years as part of its develeraging strategy.

In its report, the group also noted that with debt accounting for 60 percent of PLDT’s $5-billion enterprise value, the firm is also a geared recovery play. "Its high leverage means that a small rise in enterprise value may lead to a more substantial increase in its equity value," it said.

It likewise took note of Smart’s rising cellular margins amidst strong subscriber growth. The group quoted management as saying that Smart’s EBITDA margins for July and August this year may have improved from 58.2 percent in the first half.

This, UBS said, may imply that Smart is able to acquire subscribers at a lower cost with penetration maturing at higher levels. "This, along with our view that cellular penetration could mature at higher levels, bodes well for Smart’s earnings and cashflow," it stressed.

Smart and Piltel were earlier reported to have 11 million cellular subscribers in August, implying net adds of 320,000 a month in July and August as against a historical average of 220,000.

UBS projects Smart’s reported net income for 2003 to reach P8.46 billion, while profits after dividends is seen hitting P6.75 billion. The analyst group likewise expects income next year to improve to P16 billion due to a projected turnaround in Smart’s fixed line business.