MANILA - The Manila Electric Co.’s (Meralco) share price has fallen fast as it had climbed in less than two months since hitting its record P302.50 apiece in July, and analysts said the stock remains "overpriced" despite shedding almost half of its value last week.

"It is still expensive of course [and] that is one of the reasons why it [continues] to go down," Ignacio Soriano of Papa Securities Corp. said.

Another analyst said the unresolved issue involving P14 billion in debts owed by the country’s largest power distributor to state-owned National Power Corp. would further dampen investor sentiment with regard to Meralco next week. Regulators agreed to toss the deal settling the Meralco liabilities to the courts after state lawyers, who were not consulted, intervened.

The analyst pointed out that based on "fundamentals," Meralco does not deserve to be trading at P170 apiece — its closing price on Friday after losing 2.29% of its value — despite securing the government’s approval to raise rates and switch to a performance-based rate-setting scheme.

A study by the Organization for Economic Cooperation and Development also showed that while Meralco’s ambitious broadband-over-power-lines (BPL) project seems promising, implementation is another question especially if it is to take place on a large scale.

Implementation of the BPL in countries like Europe and United States for instance were stopped because of customers’ lack of interest and technical problems, among others.

"Meralco is currently trading at a price-to-equity (PE) ratio that is higher than its peers. The company’s market capitalization is also higher than that of the country’s biggest conglomerate," Mr. Soriano said.

Meralco is trading at a PE ratio of 67 times, meaning investors are willing to pay P67 for every peso of earnings.

This is higher than the 11.01 PE ratio of Aboitiz Power Corp., the dominant player in Visayas, the 22.48 PE ratio of Lopez-led First Gen Corp., and even Energy Development Corp., whose PE ratio stood at 54 times.

As of Friday, Meralco has a market capitalization of P193 billion, higher than Ayala Corp.’s P156 billion. The country’s largest and oldest conglomerate’s total assets stood at P233 billion as of June, as opposed to Meralco’s P182 billion.

"Meralco is still expensive. We think that its fair value is only around P90 to P120 per share," an analyst said.

Last year, San Miguel Corp. bought the government’s 27% stake in Meralco at P90 apiece, the same price for which Philippine Long Distance Telephone (PLDT) Co. bought the Lopezes’ 20% stake in March.

Since the year started, shares in the power distributor have gone up by more than two-folds after closing at P170 per share on Friday. Meralco started the year at P59.50 apiece. It touched a record P302.50 apiece on July 29.

Prior to the decline in its share price, Meralco has been the subject of speculation amid reports that San Miguel and PLDT were engaged in a buying spree.

Both companies have yet to confirm whether they have already increased their Meralco stakes.

San Miguel currently has a 27% stake in Meralco, while companies under the PLDT group have a combined 30%. The Lopezes still hold a 13% stake in the power distributor.

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