Megaworld sets P230-B spending plan

Screengrab from www.megaworldcorp.com

Tycoon Andrew Tan-led property developer Megaworld Corp. is investing around P230 billion over the next five years to introduce new real estate projects, expand existing townships and grow its landbank across the country.

Megaworld—which on Monday marked its 20th year of listing on the Philippine Stock Exchange—is upbeat on further opportunities in the real estate industry.

The capital spending planned for the years ahead is meant to sustain its growth trajectory, coming from a compounded annual growth rate of 18-20 percent in the last five years.

“As we continue to break old records and set new trends in the Philippine property market, we are motivated to work even harder to maintain our leadership position as the number one residential condominium developer and BPO (business process outsourcing) landlord in the country,” said Tan, the company chair who founded Megaworld 25 years ago.

When Megaworld debuted on the PSE in 1994, it had a market capitalization of P2.7 billion, which has since then expanded to over P144 billion at present.

In a press briefing on Monday after the ceremonial ringing of the bell at bourse, Megaworld senior vice president Jericho Go said that for the next five years, the company would launch at least 10 new residential projects and six new office projects each year alongside the expansion of retail space.

He said Megaworld, already a leading office landlord in the country, was on track to hit its goal of having one million square meters of office space in its leasing portfolio within the next five years. By the end of this year, it is expected to have 712,000 sqm of office space.  About 100,000 sqm of office space are added to the company’s leasing portfolio every year.

John Hao, head of Megaworld’s investor relations, said that at the end of the next five-year period, rental properties would likely grow their contribution to Megaworld’s net profit to 50 percent from 40 percent at present, while the share of residential development would likely go down to 40 percent from 50 percent at present.

Having a bigger portion of rental portfolio is seen making the company less vulnerable to property cycles.

The P230-billion capital spending plan for the next five years through 2018 suggests an average of P46 billion in annual budgets, larger than the P20 to P30 billion annual capital expenditures of the last five years.

This also includes allocation for land banking, to add to its existing inventory of about 300 hectares.

While Metro Manila remains a property hotspot, Go said the company’s spending outside the metropolis had been rising and is now approaching the 40-50 percent ratio to total spending, from only 10-20 percent in previous years.

Harold Geronimo, director for strategic communications and marketing at Megaworld, noted that for the three township projects in Iloilo, Cebu and Davao alone, capital outlays would reach a total of P80 billion in the next 10 years.  This is while townships in Metro Manila like the pioneering cyberpark Eastwood City are likewise being expanded, he said.

Go said Megaworld’s optimism was anchored on its “time-tested” formula of attracting residential buyers and retail tenants once office towers had been build, in line with its live-work-play-learn township concepts.

“We definitely have more unique offerings coming up for our customers in the residential, office, commercial and retail, and even in the hotel businesses. The next five years will be very exciting for Megaworld,” Go said.

On prospects of tighter lending by banks amid growing regulatory restrictions, Hao said Megaworld wasn’t too worried because only 20 percent of its buyers currently tap bank financing while 80 percent of buyers pay in cash or installments using in-house financing.

Asked about the shares of business coming from overseas Filipinos, Hao noted that out of the P68 billion in 2013 sales take-up, 17 percent came from direct international sales. The ratio had gone up from only 6-7 percent five years ago.