MPIC 2016 Core Net Income Up 17% to Record ₱12.1B

Average daily vehicle entries for all three of our domestic tollways system (NLEX, CAVITEX and SCTEX) totaled 405,805; DMT adds a further 96,265 a day; and CII B&R 48,915 a day bringing the overall total traffic on our roads to 550,985 vehicles on average every day.

In the Philippines, MPTC’s new projects are gaining traction:

  • The ₱19 billion construction of the Cavite Laguna Expressway (“CALAx”) is set to start early this year with expected completion by 2020. MPTC was awarded the 35-year CALAx concession in 2015.
  • The groundbreaking ceremony for the Cebu-Cordova Link Expressway (“CCLEx”) is scheduled tomorrow. CCLEx, with project cost of ₱27.9 billion is one of the biggest infrastructure projects outside Metro Manila. The construction of this 8.25-km toll road connecting Cebu City to Mactan Island via Cordova is expected to complete by 2020.
  • The Concession agreement for the NLEX-SLEX Connector Road Project (Connector Project) was signed on 24th November 2016. The Connector Project, with an estimated project cost of ₱21.8 billion, is an 8-km elevated toll expressway over the right of way of the Philippine National Railways starting at the junction of the North Luzon Expressway (NLEX) Segment 10 at C-3 Road/5th Avenue in Caloocan City, and seamlessly connecting to the South Luzon Expressway (SLEX) through the Metro Manila Skyway Stage 3 Project in the City of Manila. Once completed, the NLEX-SLEX Connector Road Project will decongest Metro Manila traffic and provide better access to seaports and airports. Construction is expected to commence in 2018 and to complete by 2021.

For existing roads NLEX, SCTEX and CAVITEX, service is focused on meeting traffic growth with further expansion.

The construction work on Segments 2 and 3 of the NLEX Road-Widening Project (with project cost of ₱2.6 billion) is substantially complete while construction continues on Segment 10 of the NLEX Harbour Link (costing ₱10.5 billion). Segment 10, a 5.6-km elevated expressway running from Valenzuela City all the way to C3 in Caloocan City is expected to be completed by the first quarter of 2018.

Construction for the first phase of the C5 Link Expressway is set to start by the first quarter of this year and be completed by 2020. C5 Link Expressway, which is part of the existing CAVITEX network, is a ₱12.7 billion project spanning 7.7 kilometers to link C-5 Road in Taguig to R-1 (Coastal) Expressway.

On 25th October 2016, the Board of Directors of NLEX Corporation (formerly Manila North Tollways Corporation) and Tollways Management Corporation (“TMC”) approved the merger between NLEX Corporation and TMC. NLEX Corporation as the surviving corporation will acquire all respective rights, businesses, assets and other properties of TMC as well as all of its debts and liabilities. The merger is expected to be completed by the third quarter of this year.

Under the previous Government administration, sizeable pending tariff adjustments accumulated on all our toll roads through successive failures to raise tariffs. On the NLEX these now amount to 20% for the Open System and 32% for the Closed System; on the CAVITEX they amount to 25% on R1 and 42% on the R1 Extension; and on the SCTEX they amount to 48%. These accumulated tariff adjustments now represent a material shortfall to the cash flow of MPTC and are constraining our ability to finance road construction necessary for continued economic growth.

MPTC’s various road construction projects will cost approximately ₱125 billion over the next few years. It is therefore imperative that overdue tariff increases be implemented and we are in dialogue with the new Administration on how to implement these.

HOSPITALS

Metro Pacific Hospital Holdings, Inc. (“MPHHI”) saw aggregate Core Net Income surge 34% to ₱1.8 billion in 2016 compared with the same period last year. Of the increase in core net income, 19% is attributable to the contribution from new hospital acquisitions in 2016 while 15% is through organic growth driven by lower interest expense, cost savings from purchasing synergies and increasing patient revenues across the company’s existing hospitals.

New hospital acquisitions in 2016 – Manila Doctors Hospital (20% interest acquired on 28th December 2015), Sacred Heart Hospital of Malolos Inc. (51% equity shareholding beginning 7th March 2016), Marikina Valley Medical Center (93% equity shareholding starting 29th July 2016) – contributed ₱253 million to the increase in core income. The Hospital group’s contribution to MPIC’s core net income grew 27% to ₱646 million in 2016 from ₱503 million in 2015.

On 31st January 2017, MPHHI infused approximately ₱133.5 million of cash into Delgado Clinic Inc. (“DCI’), owner and operator of the Dr. Jesus C. Delgado Memorial Hospital (“JDMH”) via a subscription to preferred shares representing approximately 65% of the total expanded capital stock of DCI. The cash infusion from MPHHI will enable the 68-year-old JDMH to upgrade its equipment and facilities to improve its ability to serve its community.

With JDMH, MPHHI has grown to 13 hospitals with approximately 2,900 beds throughout the country – eight in Metro Manila and five around the country (Davao, Bacolod, Tarlac, Zamboanga, and Bulacan). In addition, MPHHI has also invested in a mall-based diagnostic and surgical center in SM Megamall, and has indirect ownership in two healthcare colleges in Davao and Bacolod.

RAIL AND TICKETING

LRMC has operated the LRT Line 1 (LRT-1), since 12th September 2015. Since the handover of LRT-1, LRMC has successfully restored 23 Light Rail Vehicles (LRVs) bringing the total available to 100 by end of December 2016.

LRMC served an average daily ridership of 409,412 in 2016, an improvement of 5% from the average daily ridership of 389,478 recorded in 2015 when LRMC first took over operations. In 2016, the highest recorded daily ridership is approximately 527,000.

LRMC is on track with its rail replacement project. It has finished 45% of the work to replace 32-year old tracks. The rail replacement project covers a total of 26 kilometers of rail tracks, that when completed, will enable the reinstatement of a train running speed of 60 kph to shorten journey times and thereby increase capacity.

LRMC recently inaugurated the improved Doroteo Jose Station which will serve a daily average of 27,000 passengers interconnecting to LRT-2. This station is the pilot for the company’s ₱500-million Station Improvement Project, which includes all 20 passenger stations of the existing LRT-1 system.

LRMC is also ready for increased demand that will result from the Common Station Project which was signed on 18th January 2017 by the Department of Transportation (“DOTr”), the Department of Public Works and Highways and relevant rail and mall operators. Subsequent to this signing of the agreement, questions have arisen about the cost allocation for this project between the Government and the private sector. To improve the commuting experience for the public, LRMC has proposed a low cost temporary walk-way connecting LRT-1 and MRT-3 to be used while the cost allocation matter is being resolved.

LRMC contributed ₱278 million to MPIC’s Core Income in 2016 reflecting increased ridership as a result of the rehabilitation of LRVs together with operating cost savings and deferred capex spending, some of which are due to government’s delay in the acquisition of rights of way. Moving forward, the combination of pending tariff adjustments partly offset by an increasing cost base as operations expand to Cavite, will see profits normalize.

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