MERalco: Are the lights brighter?

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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.

Listed Company Profile: Meralco

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source: http://www.meralco.com.ph/

We have been waiting for this giant to rise up and be one of the leading stocks in the PSE.

About 2 months ago I was checking this stock and I knew there is something with this company. Being one of MPI's gem in their list of stocks and as well as the recent move by SMC the price of MER suddenly rose rapidly at year end it posted a 237.00 and nearly surpass its all time high of 292.00 in the first weeks of 2011 when it posted a 287.00 per share market price.

Originally a Lopez company, the entry of Manny Pangilinan's First Pacific Holdings through Metro Pacific Investments have given boost to MER's planned entry to the power generation sector a move from power retailer to power producer. And the latest is the entry of Ramon Ang of SMC .

Looking at its price it seems to hit another high after the uneasy start of 2011. 

I have seen a rise in its price back in Nov 2010 thus bought some until it went down due to year end jitters. After cost averaging till the end of 2010 I was looking at a 225 target price with a 15% gain but it went far beyond my expectation. Right now it sits at 280.00.

source: www.bloomberg.com

In fundamental aspects Meralco is in good shape having a good current ratio at 1.10 and a PE% of 35 (MRQ source www.reuters.com). Outlook on 2011 is positive and if MER's plans to get into self-generation of electricity it might have a better market price as what was seen with SCC.