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SM builder Megawide expects record earnings

Posted on April 24, 2011 11:00:49 PM [ BusinessWorld Online ]
MEGAWIDE Construction Corp., the contractor of SM Development Corp., expects to post another record year with higher revenues and profits forecast to come in from projects slated for completion in 2011, officials said last week.
“For this year, [there] will still be robust earnings,” Oliver Y. Tan, chief investment strategist of Megawide Construction, told reporters.
The firm is working on P15.4 billion worth of contracts of which P7 billion-P8 billion will be realized this year, Mr. Tan said.
These projects include 22 high-rise and 15 medium-rise condominium projects in Metro Manila covering approximately 1.298 million square meters of floor area. Megawide Construction realizes revenues and profits in its books upon completion of projects.
Net income surged by almost fivefold to P335 million last year from P71 million in 2009 after the company enjoyed a fast turnover of contracts, according to earlier reports. This, as contract revenues more than doubled to P4.52 billion last year from P1.97 billion in 2009.
Mr. Tan said that if the profit margin of 7.41% last year will be applied again this year, the company stands to post P518.7 million-P592.8 million in profits for 2011.
Aggressive construction will be supported by proceeds from its P2.29-billion initial public offering (IPO) on the local bourse in February, which had been the first public listing for the year, according to earlier reports.
Furthermore, fresh capital will be used to finance the construction of a P1-billion plant for prefabricated construction materials in Taytay, Rizal.
“We already registered the pre-cast plant to the Board of Investments because it is a big investment,” Mr. Tan said.
The project has been granted “non-pioneer status,” which means it is eligible for up to four years income tax holiday aside from other incentives such as the duty-free importation of capital equipment.
“Our target is early next year we can start the construction [of socialized housing],” Megawide Construction President Edgar B. Saavedra said in Filipino.
Over the next five years, Megawide Construction targets to deliver 100,000 more units.
Additional fund-raising scheme is in the works to beef up the chest of Megawide Construction.
“The capital expenditures are already covered by the IPO proceeds.
What we are exploring are corporate notes for working capital,” Mr. Tan said, without elaborating.
Megawide Construction started operations just before the Asian financial crisis in 1997 with a P5.5-million, three-storey building as its first project.
So far, the SM group, whose unlisted unit owns a 20% stake in Megawide Construction, accounts for 72% of the contractor’s projects.
The company’s client base includes Belle Corp., the Antel Group, the Bench Group, Prince Jun Development Group, Bellevue Hotel Group, Malate Bayview Group, Goldland Properties and Dynamic Realty.
Shares in Megawide, which allotted P2.02 billion in capital expenditures this year from P800 million last year, closed 10 centavos higher at P8.60 each on Wednesday. -- Neil Jerome C. Morales
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