Meralco (MER) stock surges 275% due to Ang-MVP bidding war

James Ryan Jonas

If you’re currently following the Philippine stock market, you’re most probably aware of the continuous surge in the price of Meralco (Stock Code: MER).

The stock of the power utility company was one of the Philippine Stock Exchange (PSE)’s biggest gainers during the first half of 2009.

As of July 31, it was up by a staggering 275% from its P58.00 price in January. In the month of July alone, the stock more than doubled in value, closing at an all-time high of P295.00 in July 29.

The rally is said to be attributed to a bidding war for control by two groups of stockholders — First Pacific under Manuel V. Pangilinan and San Miguel Corporation led by Ramon Ang.

Asked by the PSE to comment on the current price surge, Meralco replied that it is “not in a position to comment on speculations about the Company or any action to be taken by any of its shareholders.”

Analysts, however, are saying the stock is currently overbought. According to financial services firm AB Capital:

We believe MER would have a hard time breaching the P300.00 level.  Even if the rumored bidding war for the power utility is true, it will be very hard to justify a very high valuation for MER fundamentally.

Another stock trader we interviewed told us his personal assessment of the fair value of Meralco is only P120.00, far lower than its current market price.

The decline in MER price last week gives traders and investors a breather to look back at what is really happening in Meralco. Whether the surge in price will continue will depend on their expectations of the stock.

If the price continues to go up, more exciting times will certainly be ahead. But should it go down, we just hope it won’t be another BW Resources stock in the making.

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James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.