Maynilad Water Services Inc., which is planning a ₱49-billion initial public offering (IPO), is estimated to be worth at least ₱94.29 billion and as much as ₱175.98 billion—translating to a share price of ₱12.70 to ₱23.70 per share.

In a company primer, Unicapital Securities Inc. Research Analyst Peter Louise D. Garnace said the estimates were arrived at by employing a structured valuation approach based on publicly listed peers’ multiples and a dividend discount model (DDM).

“We deemed the use of DDM to be appropriate as we believe the company’s dividend policy to be a growth catalyst. Recently, Maynilad unveiled its dividend policy, which maintains a dividend payout ratio of at least 50 percent of the prior year’s net income after tax.

“This gives us confidence that Maynilad will sustain its dividend payout to investors. Thus, we are of the view that our valuation range reflects the current market condition as well as Maynilad’s future growth potential,” he noted.

Maynilad’s IPO will involve up to 2.46 billion common shares (offer shares) at a maximum offer price of ₱20 per share. The final number of shares and pricing remain indicative and will be determined after the book-building process and the completion of regulatory approvals.

The offer shares consist of 1.78 billion primary or new common shares for public offering, 36.31 million primary common shares to be offered to Manuel V. Pangilinan-led First Pacific Co. Ltd., an overallotment option of up to 266.31 million primary shares, and an upsize option of up to 379.29 million common shares.

This represents 30.45 percent of Maynilad’s total issued and outstanding capital stock post-IPO.

The firm operates the largest water concession by population served in Southeast Asia, specifically covering the West Zone of Metro Manila, with over 10.4 million people and more than 1.5 million billed connections as of Dec. 31, 2024.

“We believe the company is in a strong position to take advantage of rising water demand. According to GlobalData, the total volume of distributed water is projected to grow at a compound annual growth rate of four percent between 2024 and 2029, increasing from 2,970 million cubic meter (cu.m) in 2024 to 3,613 million cu.m by 2029.

“To meet this anticipated demand, Maynilad has earmarked ₱163.3-billion capital expenditures (capex) for the period 2023 to 2027, with a focus on enhancing service delivery and operational efficiency,” said Garnace.

Key strategic initiatives include diversifying raw water sources through new water treatment, expanding service coverage to 95.1 percent by 2026, and upgrading infrastructure to withstand extreme conditions.

The company is also prioritizing the expansion of wastewater capacity, aiming to reduce non-revenue water to 20 percent by 2030 and increase sewer coverage to 49 percent by 2031.

“We believe that Maynilad is on a growth momentum underpinned by the tariff increases in the West Zone and sustained billed volume expansion. Following the approval of the revised concession agreement (RCA), Maynilad implemented a staggered tariff hike of ₱3.29 per cu.m and ₱6.26 per cu.m in 2023 and 2024, respectively.

“For 2025, we see an 8.05-percent increase in average tariff rate amid the effectivity of the additional ₱2.12-per-cu.m scheduled increase, in addition to the 20- to 25-percent increase in environmental charge,” he added.

Furthermore, Garnache said the billed volume of Maynilad’s West Zone franchise area continues to grow, posting a year-on-year increase of 2.8 percent while average tariff increased by 19 percent year-on-year.

“In our view, billed volume growth in the West Zone will be driven by greater water consumption, underpinned by urbanization, population growth, and increased standards of living,” he noted.