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Maynilad’s PSE Debut Underscores Defensive Strength and Value Appeal; Dividend Yield Tops 7%

Maynilad Water Services Inc., newly listed on the Philippine Stock Exchange, is emerging as a standout defensive play despite its capital-intensive nature. The company’s latest financial results and dividend policy highlight its resilience, long-term value proposition, and income potential that rival those of top-performing REITs.

Defensive Profile Backed by Strong Results

Maynilad operates in the water and wastewater sector—an essential service with stable demand across economic cycles. Under its Revised Concession Agreement (RCA), the company earns a fixed nominal 12% return on approved expenditures, with cost recovery guaranteed through tariff adjustments. The concession term, extended to 2047, aligns with its legislative franchise, ensuring predictable cash flows for decades.

Financial performance for the nine months ended September 30, 2025, reinforces this defensive positioning:

  • Operating revenue: ₱27.65 billion, up 9.5% year-on-year, driven by wastewater revenue growth of nearly 30% following the environmental charge increase to 25%.
  • Net income: ₱11.41 billion, up 18.1% YoY, despite heavy capital spending.
  • EBITDA: Approximately ₱19.9 billion, providing 9× interest coverage, even as debt rose to ₱93.6 billion to fund expansion.
  • Equity: ₱80.5 billion, with net-debt-to-equity at a manageable 1.08×.

These figures show Maynilad can absorb large-scale investments without compromising financial stability—a hallmark of a defensive stock.

Capex Recovery Guaranteed

Unlike many capital-intensive businesses that face uncertainty in recouping investments, Maynilad’s model ensures full recovery of capital expenditures through regulated rate adjustments. Every five years, the rate-rebasing process allows the company to recover prudently incurred costs and earn its guaranteed return. This mechanism transforms heavy capex into a predictable earnings driver rather than a risk factor.

Dividend Sustainability and Competitive Yield

Maynilad declared ₱6.4 billion in cash dividends for 2025, or ₱1.14 per share, representing a 56% payout ratio and a dividend cover of 1.78×. At its recent closing price of ₱16.06, this translates to a dividend yield of about 7.1%—competitive with, and in some cases higher than, leading Philippine REITs, which typically offer 6%–7.5%.

Unappropriated retained earnings of ₱25.98 billion and strong operating metrics provide additional cushion, signaling that Maynilad can sustain generous payouts even amid its ₱160-billion capex program through 2027.

Value Proposition and Growth Drivers

The ongoing rate-rebasing cycle (2023–2027) ensures incremental tariff hikes, including a ₱2.12/m³ adjustment effective January 2025, alongside the higher environmental charge. These measures, coupled with wastewater expansion and forex risk mitigation via FCDA mechanisms, underpin predictable earnings growth.

Bottom Line

Maynilad’s listing offers investors a unique proposition:

  • Defensive strength through essential services and regulated returns.
  • Guaranteed capex recovery via tariff adjustments, reducing investment risk.
  • Value appeal via sustainable dividends and a competitive yield of 7.1% at current prices.
  • Long-term visibility supported by a concession extended to 2047 and a tariff path locked in through 2027.

For income-focused and value investors, Maynilad stands out as a stock that combines resilience with rewarding cash returns—an alternative to REITs with the added advantage of inflation-linked, regulated cash flows.

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