MANILA Electric Co. has an unenviable task of balancing the interest of its two major clients. As a public utility company, it provides electricity to the homes of customers and to the plants of industrial users. As a company listed on the Philippine Stock Exchange, it tries to please the public investors who trade on its shares, some even owning some for the long term.
This balancing act is the responsibility of the members of Meralco’s board and of its management team. These executives can never escape public scrutiny because as a listed company, Meralco is governed by the market’s full disclosure rule. Luckily for the public, they have the Securities and Exchange Commission for an effective partner in monitoring Meralco’s compliance with the market’s policy of transparency.
The task of “squealing” on what the members of the board take up inside the boardroom falls on the shoulder of the company’s corporate information officer, who may also be the corporate secretary. Or is it the other way around where the corporate secretary is also the corporate information officer? Due Diligencer is making the distinction to avoid any controversy on billing as to who between the two should be named first.
As with their counterparts in other listed companies, Meralco’s CIO/CorpSec discloses to the public anything that goes on inside the boardroom. But he or she could facilitate his/her job by following what has been defined by some investors as the ART of transparency where the three letters stand for accuracy, relevance and timeliness.
As a consumer, you would look at Meralco’s financial filings to see any number in them that won’t please you and would give you a reason to complain. Then you read the company’s financials in the third quarter where you try to find any intriguing and questionable entry.
Then you conclude that Meralco’s nine-month net profit of P14.366 billion could be too much for a public utility company. This net profit is equivalent to 7.072 percent of P203.126 billion of the company’s total revenues of P203.126 billion, including “others”, during the period. You want to ask Meralco: Can’t the company lower such percentage of net income against electricity revenues to benefit consumers?
This could be the easier way of computing Meralco’s accounting entries in its financial filings to make them easily understandable. To consumers, being lay people, return on investments may be too technical to consider in computing the company’s profitability.
But what if you are also a Meralco stockholder? As an investor, you have the right to question the company with regard its financial operations. For instance, you may want to ask why the company’s billings in the first three quarters of 2014 dropped 3.058 percent to P199.042 billion.
Then you had this poser: Couldn’t Meralco have consistently reported increasing revenues just as it did in the quarter ending Sept. 30, 2014 when its sales went up 5.642 percent to P69.322 billion from P65.62 billion in the same period in 2013? In seeking the answer, you totally forgot that you are a consumer and user of electricity that Meralco sells.
All your interest is focussed on your company’s profitability which determines its ability to distribute dividends either in cash or in stock. You know that Meralco had piled up consolidated retained earnings of P57.574 billion. This surplus would translate to P51.086 per share when divided among holders of 1.127 billion outstanding common shares.
Of course, surplus, or retained earnings, which is an amount that represents accumulated net profits after dividends, is not all available for distribution to stockholders as dividends. Part of it could be allocated for projects while certain amounts included in retained earnings of a holding company have yet to be declared as dividends by subsidiaries.
But as both consumer and investor, there is one thing that you may want to accomplish yourself to benefit from Meralco’s huge profits: Invest in its common shares which are publicly traded because there is one upside to owning them: the dividends could alone could pay for your monthly electricity bills.
Here is a computation: This year, Meralco distributed P12.36 per share dividend. If you had bought a share at P255, the dividends translate to a return of 4.847 percent per year. This means if your monthly bills amounts to P1,000 a month, you need to 81 Meralco common shares (P1,000\P12.36 dividend per share ) for your one-month bill to be self-liquidating and P247,860 for 972 shares (81 shares x12 months) for you to earn the dividend to pay your bills in one year.