Megawide plans to sell 17% stake unloaded by Sys

Construction and engineering firm Megawide Corp. plans to offer to the market a 17-percent stake it recently bought back from the family of tycoon Henry Sy Sr., a move that could raise close to P6 billion in fresh equity while widening the company’s public float.

“As we bid for more PPP (public-private partnership) projects, there’s a need to expand the balance sheet,” Megawide chief finance officer Oliver Tan said in a press briefing after the company’s stockholders meeting on Friday. “We may consider going back to the capital markets again, depending on immediate requirements.”

While there were many alternatives for building capital, Tan said one key option on the table was the re-issuance of the 17-percent stake recently bought back from the Sy family’s Sybase Equity Investment Corp. through a private placement deal.

The exercise would depend on market conditions but Tan said it was “quite possible” the equity deal would likely be done via a private placement before the end of this year.

The bloc consisted of 410.84 million of company shares now lodged in the company’s treasury. The shares were recently purchased by Megawide from Sybase at P10.0379 per share.  The company thus spent P4.12 billion to buy back the shares of Sybase, which invested when Megawide went public in 2011.

Based on Megawide’s closing price of P14.90 at the stock market on Friday, the shares are worth P6.12 billion.  As private placement deals typically come with a 5-10 percent discount to market prices, Megawide can raise P5.5 billion to P5.8 billion in fresh equity based on current market prices.

Meanwhile, Megawide expects to top this year the record net profit it posted last year.  Tan said the company’s guidance for net profit on a consolidated basis (including minority interest) was P1.9 billion compared to P1.5 billion last year, marking a 26.7 percent increase.  This would be on the back of P17 billion in projected revenues for 2016, up by about a fifth from last year’s level.

Under its diversification plan, Megawide would be focusing on four core businesses: construction, airport operation, transport and power generation with a specific focus on renewable energy. In 2015, construction contributed 66 percent of total income, with the airport business bringing in 34 percent.