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Megawide raises profit guidance

[ ] June 16, 2011

MEGAWIDE Construction Corp. has raised its profit guidance this year as the company diversifies its revenue streams to support its long-term growth.

The major contractor of SM Development Corp. said indications of its first half performance showed that its profit tripled, which may push its net income to P750 million to P800 million by yearend, or 2.5 times more than the P335 million posted in 2010.

This is higher than the initial full-year guidance of P560 million the company issued during its maiden share sale in February.

“We’re very confident of overshooting that,” Oliver Tan, Megawide chief investment strategy officer, told reporters.

Driven by its huge backlog valued at P12 billion, revenues are expected to hit P7 billion to P8 billion, or 55 to 77 percent higher than the P4.52 billion generated last year.

While the company posted robust earnings in the first six months, Megawide expects to pull off a “second half earnings surprise” since the company historically books new contracts during the latter part of the year.

“If you will gauge the [capital expenditures] of the top five developers, they have close to P200 billion worth of projects to be rolled out starting this year up to next year. Looking at the property horizon, we’re still bullish on the residential sector,” Tan said.

“On top of the property market, we’re making inroads to new markets, which includes possibly joining infrastructure projects,” he added.

Within the week, the construction firm is set to take part in the bidding of some infrastructure projects of the government as a contractor.

While it is the preferred contractor of the SMDC, Megawide is negotiating with new clients to diversify its sources of revenues. It is “deep into negotiation” with three listed firms for projects in the affordable segment of the market, Tan said.

“SMDC will remain as our largest client but we already started to entertain other clients to mitigate our concentration,” he said. The firm earlier said it was courting Ayala Land Inc. for possible projects.

The Sys of SM fame own part of Megawide.

Its shares rose to P9.03 on Wednesday from P9.00 each on Tuesday.

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