Investing in Philippines: MERalco: Are the lights brighter?

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Sunday, January 29, 2012

MERalco: Are the lights brighter?

source: www.meralco.com.ph


With the recent increase of Manny Pangilinan's First Holdings ownership of Meralco through Beacon Electric Assets Holdings to what direction does Meralco will go?

Once one of the Lopez group's gem, Meralco is the leading power distribution corporation in Philippines. The latest move by the Lopez group to sell most of their subsidiaries to focus on their main business, broadcasting, gave other companies like Manny Pangilinan's MPIC to expand their infrastructure in the Philippines.

The latest movement inside Meralco has been pushing Meralco's market price and it might hit the resistance price of 300 per share. As of last friaday's trading, Meralco's share is at Php 274.00 share.

MVP has been known for his Midas touch and everybody seems to jump in Meralco. 


With the known resistance at 300.00 could we still join the bandwagon and buy MER at 274.00?

Fundamentally, MER is okay with a Current ratio of 1.65 and Debt - Equity of 45.75. Technically with a PE ratio of 26.46, it may seem overvalued already.(Data from http://www.reuters.com/finance/stocks/).

One key development being made by Meralco is the introduction of prepaid electricity use. As mentioned in the Business Mirror, Meralco is in the testing stage if prepaid electricity would be accepted by consumers. This could be a possibility. Such scheme where users can chose how much to pay for their usage is said to be a hit due to the nature of most income earners. Also such scheme will open business just like what prepaid loading stations for cellular use.

With that it could be possible that MER will surpass its 300 level resistance level.

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Chitika