Pick of the Week - DMC and MWC

February 1, 2020 at 3:37 pm, No comments

Can history repeat itself?

A long time ago, back in the year 1972 during the Marcos Era, the government took control of Meralco by force by alleging them for excessive pricing. Today, the Philippine Government has threatened Manila Water and Maynilad.

What does it mean if your an investor?

If you're a foreign or even a local investor, this incident has a huge negative impression, especially if it comes true. Why? It gives any businessman or investor so much uncertainty. Manila Water and Maynila have a clear contract with the government before.

Thus, that can be the reason why they confidently spend so much money on the infrastructures because they know that the government is backing them up (the government will subsidize the losses to the winning bidder if there are any losses).

Besides, it can be the "government's duty" to provide water in the communities back in those days. But since they might not have the capacity before, they gave it to a private company, and Manila Water and Maynilad took the opportunity. The government might have thought before that "Kahit medyo patalo itong kontrata, basta lang mag karoon ng maayos na tubig ang Pilipino". In other words, the government is now showing and saying that "I can break any contract" In fact, "what they're doing right now, we call it economic sabotage".

What are the effects?

Of course, it's a massive sell-off, not just in Manila Water and Maynilad, but also to any utility company. Isama narin ang Meralco, PLDT, Globe or any company that the government can call its services as "economic sabotage". Can we also call San Miguel-Purefoods economic sabotage? They have increased the prices of the chicken since the African Swine Fever.

Of course, if you are the business owner, it can be disheartening. There are also rumors now that Ayala wants to exit and sell the water business.

Buying Opportunity for MWC

Entry Level: Below 12.00 per share

Target Price: P15.00 or 20.00 per Share

STOP LOSS: P8.55 per share

Image result for manila water

Buying Opportunities for DMC

Entry Level: Below P6.20

Target Price: P7.00 or P9.00

STOP LOSS: P5.80

Image result for DMCI

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