Megaworld’s target price represents a 20 percent discount to the COL Financial’s Net Asset Value estimate of P11.26 per share.
COL is estimating that Megaworld will enjoy a net income growth of P7.9 billion in 2013, up from the P7.4 billion earnings in 2012. This gives the real estate giant a price to earnings ratio of about 14.4 this year or way below other real estate properties having a price to earnings ratio of 20x or more.
COL Financial said that the upgraded rating is due to the high prices of the company’s properties located in prime locations such as the Bonifacio Global City (BGC) combined with the country’s strong economic growth, low interest rates and continued infrastructure developments benefitting real estate companies like Megaworld. Likewise, it said that the increase in income for Megaworld will be driven by its P180 billion in sales backlog and strong rental portfolio, assuming a six-year development period and a 16x price to earnings ratio valuation.
They noted that the company’s current stock price is a good buy given the stable source of cash flows coming from its residential, office and commercial developments.
Megaworld is looking to double its rental income from P5 billion in 2012 to P10 billion within the next 5 years. The growing OFW remittances, expanding BPO sector, and increase investments in infrastructure will further jump up the property prices in the company’s landbank.
Megaworld is the only property company in the Philippines that is in a net cash position with P26.8 billion of cash and only P20 billion in debt. Megaworld has also the largest landbank in Fort Bonifacio with 105 hectares.
The company has built and delivered up to 240 buildings that include residential condominiums, office towers and hotel buildings with a total footprint of more than 6 million sqm.
Megaworld, one of the companies under the holding firm Alliance Global Group Inc. (AGI), pioneered the “live-work-play” township concept in the Philippines. It started the country’s first Cyberpark through the successful Eastwood City in Libis, Quezon City back in 1997. This groundbreaking formula is now being replicated in its other township developments like Newport City, Forbes Town Center, McKinley Hill and McKinley West. Soon to rise are The Mactan Newtown in Lapu Lapu City, Cebu and the Iloilo Business Park in Iloilo City.