Equity Research

October 03, 2019

FV Est. 3Mos.: ₱28.46
BUY Closing Price: ₱22.35 Investment Highlights
Annual Div.Yld: 5.68%  Coal sales of 15 to 16MMT enough to offset price volatility in
Total Upside: 27.34%
the local and global market.
BUY
Key Stock Data  New contract from Meralco worth 590 MW upon completion of
52 Wk High ₱43.90 Sem-Calaca rehabilitation
52 Wk Low ₱19.80  Southwest Luzon outperforms and produces nearer to its design
Free Float 26.04% capacity and availability for the first time
No. of Shares (M) 4,250
Market Cap (B) % ₱96.49
3M Ave. Daily 61.17 EXECUTIVE SUMMARY
KVol(K)
We recommend a BUY for Semirara Mining and Power
Corp with a fair value of ₱ 38.50, an upside of 75%, due to the
SCC 1 Year Daily robust Coal Mining operations and the return to full capacity of
Chart SCPC

Semirara Mining and Power Corp H1 2019 Revenues

showed signs of stability by declining only by 1.01% YoY to
₱23.38B. Despite only showing ₱6.01B or a 35.36% YoY decline in
H1 2019 Earnings, SCC actually beat our internal expectations on the
back of a 14.42% growth in coal sales volume and a 102% growth
in power generation from the 300MW Southwest Luzon Power,
which took advantage of the short power supply experienced in Q2
2019 due to force outages brought about by an earthquake in Central
Luzon. These fresh leads were enough to offset lower global coal
prices and lower contributions from SCPC due to the on-going
rehabilitation.

The encouraging H1 2019 coal production and sales of SCC

warranted an upgrade of our coal production estimates from
14MMT to 15MMT, even with the expected weakness in 2019 Q3
production. Coal prices were also upgraded from ₱2,084/MT to
₱2,223/MT on account of the expectation that prices have stabilized
at the 2200 levels and will carry over into H2 2019. With these, we
Key 2018 2019F 2020F 2021F 2022F upgraded our 2019 FY earnings from ₱4.15B to ₱9.31B
Operational
Statistics Tempering the positives, we have also factored in the Sem-
Calaca rehabilitation delay ,which is equivalent to roughly 4 months
Coal Prices 2,655 2,223 2,223 2,223 2,223
of non-operation for SCPC Unit 2, and the normalization of the
Coal Sales 11.56 15.00 15.80 16.20 16.40 SCC’s corporate income tax into our models. The numbers will show
that SCC Earnings will still grow by 33.67% to 12.44B in 2020 while
further improving to 14.11B in 2021 when the company can
SCPC 3,342 1,724 3,661 4,094 4,244 maximize its coal and power operations.
Power Sales
In summary, SCC is severely discounted by the market even
SLPGC 1,279 1,539 1,653 1,791 1,929 by using the 2019FY earnings. This reiterates the upside potential of
Power Sales the company and our recommendation to BUY at current levels.
Power ASP 4.03 4.40 4.40 4.40 4.40

Key Financial
Data 2018 2019H1 2019F 2020F 2021F 2022F
Revenues (B ₱) 41.97 23.38 44.36 53.2 55.97 57.38
Rev. Growth -1.01% 5.71% 19.92% 5.20% 2.53%

Operating Profit 31.81% 26.83% 25.61% 35.27% 37.60% 38.63%

Margin
Net Income (B) 12.02 6.01 9.31 12.44 14.11 15.02
Net Income -26.13% -22.61% 33.67% 13.45% 6.44%
Growth
Net Income 28.65% 25.71% 20.98% 23.38% 25.22% 26.18%
Margin
EPS 2.83 1.41 2.19 2.93 3.32 3.53
ROE 20.46% 14.86% 15.04% 18.45% 17.78% 16.08%
D/E Ratio .78 .83 .91 .76 .49 .36
Divs/Share 1.25 1.25 1.25 1.25 1.25 1.25
Payout Ratio 44.18% 57.09% 42.71% 37.65% 35.37%