Construction and engineering firm Megawide Construction Corp. is likely to end this year with a net profit of P1.2 billion, about 20 percent higher than the level last year, as its construction business tracked the pace of the country’s economic growth.
Megawide, which has been active in the government’s infrastructure-building program under the public-private partnership (PPP) framework, is also in the process of diversifying its asset portfolio to reduce its reliance on the construction business.
Oliver Tan, chief finance officer of Megawide, told reporters in a recent briefing that the company was on track to hitting its net profit goal of P1.2 billion this year compared to P1 billion last year. This is seen backed by an increase in revenue to P11 billion, about 35 percent higher than the 2012 level, he added.
In the first nine months of the year, Megawide posted a net profit of P983.2 million, 55 percent higher year-on-year on the back of a 29-percent rise in gross revenue to P7.22 billion.
Tan told reporters in a recent briefing that two years from now, Megawide might start unlocking values out of its new and expanding pipeline of PPP projects.
This year, Megawide bagged two school building projects with the Department of Education and a Philippine Orthopedic hospital build-operate transfer project. Recently, a Megawide-led consortium submitted the highest financial bid for the hotly contested Mactan Cebu International Airport rehabilitation project.
The bid submitted by Megawide in partnership with Indian firm GMR for the Cebu airport project will likely be the company’s biggest PPP project so far. However, its bid is still currently under review by the government prior to awarding.
“Right now, 100 percent of our earnings are derived from construction projects, from the order book,” Tan said. Two years from now, Tan said it might start earning from the hospital project and the prospective Cebu airport project.
“That’s what the strategy of management is—really to chase for asset portfolio what will give us stable, recurring earnings stream because construction is cyclical,” Tan said. “Right now, we’re enjoying the boom.”
Taking into account the hospital and prospective airport project, Tan said Megawide might start generating 30 percent of its revenue from recurring earnings from infrastructure assets after two years. By 2017, Megawide hopes to generate 40 to 50 percent of its revenue from these assets with recurring cash flows.