The Philippine Star, 23 December 2013

By Neil Jerome C. Morales


MANILA, Philippines – Megawide Construction Corp., one of the country’s top building contractors, is gearing up to become an infrastructure and construction player in the local bourse.

By 2017, the listed firm will derive half of its earnings from the recurring income brought about by several public private partnerships (PPP) bearing fruit, an official said.

“Two years from now, we will be having our earnings from special purpose vehicles like the hospitals and, if barring any surprises, from the airport,” said Megawide chief financial officer Oliver Tan.

The management strategy is “to chase for asset portfolio that will give us stable recurring earnings stream because construction is cyclical,” Tan said.

Hence, Megawide will set itself apart in the local bourse as an infrastructure and construction firm, he said.

So far, all of Megawide’s income is sourced from the construction of high-rise and residential and office towers.

Megawide is the top contractor of condominium builder SM Development Corp.

To counter the cyclicality of the construction business, Megawide has been aggressive in bidding for the government’s PPP projects.

Early this month, the Department of Health awarded the 25-year construction, maintenance and operation contract for the P5.7-billion new Philippine Orthopedic Center to Megawide, which was the project’s sole bidder.

It marked the third PPP project bagged by Megawide following the PPP School Infrastructure Project Phase One (PSIP-1) it secured in 2012 and PSIP-2 last October.

Megawide is also the frontrunner to bag the P17.5-billion Mactan-Cebu International Airport project.

“The contribution in the earnings two years from now will change,” Tan said.

Megawide expects PPP projects to account for 30 percent of the company’s income in two years before increasing to 40-50 percent by 2017, Tan said.

For this year, Megawide projects to post a net income of P1.2 billion and P11 billion in revenues. In 2012, Megawide recorded P1 billion in earnings and P8 billion in revenues.

In the nine months to September, profits of Megawide surged 55 percent to P983.24 million from P633.49 million “because of the higher construction revenue earned.” The company recorded P7.22 billion in gross revenues, up 29 percent from P5.61 billion last year.

For new PPP projects, Megawide is looking at the P64.9-billion Light Rail Transit (LRT) Line 1 Cavite extension project.

The concession agreement for LRT1 was revised to address five major issues: real property tax, power rates, warranty on the structure, fare adjustments and the negative bid given a failed auction in August wherein only Metro Pacific Investments Corp. submitted its technical and financial proposal but without partner Ayala Corp.

“We bought [bid documents] and we are studying it,” said Louie Ferrer, vice-president for marketing and corporate information officer of Megawide.

“In one way or the other, we will always be participating [in PPPs] like in the construction phase,” Tan said, adding that the elevated rail could be built using pre-cast elements.

The listed firm’s P1-billion pre-cast production plant in Taytay, Rizal is the biggest one-stop of pre-cast concrete building systems in the country and one of the largest in the region. Materials like beams, columns, stairs and walls can be produced in the pre-fabrication plant.