Metro Pacific Investments [MPI 3.79 0.52%] [link], the diversified conglomerate controlled by Manny V. Pangilinan, posted a Q1/22 profit of P5.7 billion, down 19% from Q1/21 profit of P7.0 billion, and up 351% from its Q4/21 net loss of P2.3 billion.
The “high-bar” of Q1/21 income was established in part due to the sale of some of MPI’s foreign business units (Global Business Power and Don Muang Tollways) which resulted in a large, one-off boost to net income in Q1 of 2021.
Taking those kinds of one-offs out of the equation, MPI reported that consolidated core net income was actually up 23% y/y to P3.1 billion, and up 11% q/q.
Segmented analysis shows that the company’s power business improved on strong demand for electricity both home and abroad, while the toll-roads business showed a strong continuation of the recovery of road traffic and tolls.
MPI’s interests in water infrastructure were largely flat, and its rail/logistics/real-estate/
The company credited its “debt refinancing and re-rating activities” in 2021 for the 11% drop in net interest costs in the first quarter.
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Regardless of these results and MPI’s history as a huge infrastructure player, the company feels like it has been stuck in a transitional phase ever since President Duterte politicized the water concession contracts back in 2019, causing MVP to openly question whether the era of publicly-traded utilities was dead in the Philippines (spoiler: it wasn’t), and indicate that he would search for new low-profile infra and infra-related opportunities to drive shareholder returns in future quarters.
Each time MVP mentions this pivot, he almost reflexively talks about “logistics” as the potential target of his considerable financial affections, and this time is not any different: “We are also actively evaluating opportunities in multiple sectors that will potentially enable further economic development such as logistics, agriculture, real estate, and tourism.”
As I’ve mentioned before, the big players in the logistics industry are mostly private companies, so unless MVP has a 10-year plan to apply considerable capex to developing a nation-wide footprint of warehouses, cold storages, and distribution hubs, I’ve got to think that he’s scouring the market looking for acquisition targets. Funny thing is, he’s not the only oligarch stomping around the market with truckloads of cash, and yet, we’ve only seen a few relatively minor deals like when AC Logistics (a subsidiary of Ayala Corp [AC 730.00 2.28%]) acquired that 60% stake in Air21.
Maybe the oligarchs just have sticker shock for the valuations that these logistics firms can support. If so, I think it’s a mistake to assume that those valuations are headed lower, given the broad signals of demand recovery that the economy has been showing.
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