Coal Asia Holdings's net income is seen to get a 42 percent boost in 2014 thanks to its being granted incentives by the Board of Investments (BOI).
In a disclosure to the Philippine Stock Exchange, the firm said wholly-owned subsidiary Titan Mining and Energy Corporation (TMEC) secured incentives as a new producer of coal in Davao Oriental and Zamboanga Sibugay on a non-pioneer status.
The incentives include an income tax holiday for four years from January 2016 or the actual start of commercial operations, whichever is earlier, but not earlier than the date of registration.
Coal Asia can also import capital equipment, spare parts and accessories at zero duty from the date of effectivity of Executive Order No. 70 for a period of five years from the date of registration or until the expiration of EO 70.
The firm also gets additional deduction from taxable income of 50 percent of the wages corresponding to the increment in number of direct labor for skilled and unskilled workers in the year of availment as against the previous year if the project meets the prescribed ratio of capital equipment to the number of workers set by the BOI.
It can also import consigned equipment for a period of 10 years from date of registration, subject to posting of re-export bond; employ foreign nationals; and enjoy simplification of customs procedures for the importation of the equipment, spare parts, raw materials and supplies.
"The impact of these BOI incentives on the company's bottom-line is very significant and can be a catalyst for further growth. Its revalued earnings forecast will be a positive driver of the company stock price," said DA Market Securities fund manager Aldo Claparols.
He added that "the income tax holiday will significantly revalue the company's 2014 income from P500 million to P714M based on 30 percent absorption of supposed tax back into the company's bottom-line which would result in a PE ratio of 4x making it far and away the cheapest energy stock in the PSE."
On a macro level, Coal Asia chairman Harald Tomintz lauded the government's support for projects that would contribute to industrial growth and economic upliftment, particularly in the countryside and in the South of the country where several opportunities are found. "The BOI approval of incentives strongly signifies government's commitment to pursuing its development thrust to the local coal industry. Data from the Department of Energy (DOE) reported a historical average of 2.2 MMT in local production. This output tripled to an average of 6.7 MMT in the last three years," Tomintz said.