CreditSights Inc. said Tuesday it maintained its underperform recommendation on San Miguel Global Power Holdings Corp. as it remains “highly concerned about its frail credit profile and perpetual call/refinancing uncertainties.”
CreditSights said it expects SMGP’s bond prices to remain volatile, and sees further downside risk at current valuations.
“We remain highly concerned about SMC GP’s frail credit profile and perp call uncertainties. High thermal coal input costs have kept its leverage metrics extremely elevated and free cash flows in negative territory,” it said.
It said SMGP’s 2022 financial results were weak even as revenues soared 66 percent year-on-year.
CreditSights said SMGP’s overall earnings before taxes, depreciation and amortization impact “is negative as it implies the remaining contracts could not fully pass on the higher input costs.”
It said the power company’s liquidity remained tight, but it believes SMGP can roll over its bank debt due to the backing of parent San Miguel Corp.
“We anticipate SMC GP’s credit metrics to improve slightly in FY23 versus FY22 due to lower thermal coal input costs, albeit remaining extremely stretched,” it said.
“Our main concern in the near term is how SMC GP plans to tackle its chunky $3.3-billion perpetual call profile that poses high non-call risks,” the company said.
