Metro Pacific [MPI 5.05, up 1.0%; 145% avgVol] [link], the Indonesian-owned diversified conglomerate led by Manny V. Pangilinan, posted a Q2 profit of P6.7 billion, up 34% y/y from its Q2/22 profit of P5.0 billion, and up 4% q/q from its Q1/23 profit of P6.4 billion. Relative to Q1 performance metrics, MPI said that Meralco's core Q2 net income was up 12% to P10.2 billion on higher distribution revenues, that Maynilad's core Q2 net income was up 5% to P2.2 billion on higher water consumption during the 'summer months', and that Metro Pacific Tollways saw its core net income increase thanks to a 'surge in traffic' and a toll increase on NLEx. From a year-on-year perspective, Meralco's core net income was up 53%, Maynilad's core net income was up 35%, and Metro Pacific Tollways was up 11%. In a press release, MPI said that its earnings were driven by 'strategic investments' in the power generation business, and that it expects these investments to continue driving results into the future. With respect to its proposed delisting, MPI said that it expects investors will have 'several opportunities' to 'participate directly in the underlying assets' of MPI if the 'contemplated spin-offs' of the various portfolio companies materialze.

MB BOTTOM-LINE: This press release lays out the MPI Consortium's delisting thesis in one quick paragraph. They believe that the market price of the parts (when they're sold individually to the market through an IPO or some other method) is greater than the market price of the sum of those parts, and they're willing to pay a significant premium over MPI's trailing share price to the minority holders to try and execute that spin-off plan. Now, the easy question that MPI shareholders (as I am) would likely ask is: Why not just try spinning off these companies now, so that we - the long-term holders - might participate directly in the value gain? MPI's answer would probably be nuanced and touch on how conglomerates are generally punished in valuation terms, but how MPI is punished even more than most, and they'd be right about that. In less public terms, they'd probably talk about the political risk that the Duterte administration raised in its attacks on Manila Water [MWC 19.00, down 2.1%; 262% avgVol], PhilWeb [WEB 1.80 unch; 113% avgVol], and ABS-CBN [ABS 4.25, up 1.7%; 38% avgVol], and how removing the holding company from the public market might reduce the potential attack surface of the conglomerate. Behind closed doors, the fact that MVP is openly talking about retirement (it's nothing new, but it's hit the news more often than before) with no successor in sight, on the heels of a pretty high-profile capex scandal with PLDT [TEL 1275.00, down 3.0%; 112% avgVol], might also cut in favor of pivoting away from the 'personality-driven' holdco to something a little less flashy and a little more boring and professional. I invested in MPI thinking that it was under-valued and that it would get a bump from a potential Maynilad IPO, and while I wish that MPI would execute its value-enhancement strategy while I'm still onboard, I'm happy for the chance to realize my profit through the liquidity of the tender and allocate my money elsewhere.

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