All eyes on Meralco stock meet, but shares already down 21%

MANILA, Philippines- Both the investor and the average consumer await eagerly the result of the Manila Electric Co.’s annual stockholder’s meeting. On Tuesday, arguments raised by both the Lopez family and the Government Service Insurance System come to a head, and directors of the country’s largest power distributor will be elected. Meralco, once the crown jewel of the Lopez family’s holdings, is now its pain in the neck. Since the last week of April, GSIS chief Winston Garcia, a member of the Meralco board, has been raising questions on the way the country's largest power distributor is being run. His inquiries have led to accusations that Meralco overcharges its customers, or most of the electricity users in the Philippine island of Luzon. This has led to plunder charges being filed against 15 of the company’s officials, including members of the Lopez family itself, for allegedly making illegal charges to the public. If Winston Garcia had his way, new people will be elected to head the utility and “transform" its operations, which would then lead to lower electricity rates for the majority of Luzon, the area serviced by Meralco. All eyes will be glued on the 8 am meeting at the Meralco Theater, where the fate of one of the country’s premier companies will be decided. In the meantime, however, the value of the power distributor has already taken a hit. Meralco stocks have risen to a high of P116 each in the past year. However, in the past month, the value of MER, a part of the bell weather Philippine Stock Exchange index, has fallen to P60 apiece levels. Much of the fall happened in the past month, when Garcia started leveling accusations of transparency and price fixing against Meralco. From the last week of April when Meralco had been trading at P80.50 to Monday’s closing price of P63, the company’s stock price has already fallen more than 21 percent. MER to dive to P47.50 “This dive, 100 percent of this, can be attributed to the current mess involving GSIS," an analyst from one of the country’s top brokerage firms told GMANews.TV. “When the GSIS bought it shares last year at the price of around P80-P81, investors were assured that it would be in its interest to keep the price at the same level. Now there is no more assurance." The government owns around 33 percent of Meralco, which includes the GSIS’ 23-percent stake. The Lopezes hold only a shade more than the government at 33.4 percent, and the stock meet on Tuesday will determine if this is enough to maintain control of one of the country’s largest utilities. However, the analyst said that Tuesday is a lose-lose situation for Meralco stocks, which he sees approaching a low of P47.50 in the coming months. This low was touched by MER in February of 2007, the same time global stocks plunged, led by China. “There is enough in the situation to drive panic of that magnitude," the analyst lamented. “Investors have already received this message from the government that… there’s nothing to stop a similar harassment of other utilities like PLDT and Globe and Manila Water. There is policy uncertainty," he added. Philippine Long Distance Telephone Co. and Globe Telecom are the country’s two biggest phone firms. Manila Water is the water service provider to the eastern half of Metro Manila. Still a good investment However, Jason Lagrimas, analyst at online broker 2TradeAsia said that even this word and legal war between the Lopezes and the GSIS cannot take away the fact that Meralco is still a good investment. “Meralco is still a good stock. A lot of brokers are saying that at P63, the stock is already a bargain. [But whatever happens] the company is a good stock and its services will always be needed whether in a bear market or in a bull market," he said. Lagrimas refused to reveal what he thinks is the bottom of the Meralco price fall will be, but said he will “keep an eye out" on the stock. The broker also said that part of his hopes for an eventual Meralco rise is hinged on the government granting the utility a go-signal on its Performance-Based Rate setting system application. This system will allow Meralco more freedom to set distribution prices without having to get the approval of the Energy Regulatory Commission. Even with the way things are going, with the government on an offensive against Meralco, and on a track which looks like it is “trying to appease consumers," Lagrimas said he is “hopeful" that this application will be granted. - Patricia de Leon, GMANews.TV