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Megawide ready for resurgence in construction business

/ 05:03 AM July 03, 2019

Construction and engineering firm Megawide Construction Corp. expects a resurgence in its construction business this year, but net profit will likely be flat compared to last year due to airport depreciation and interest expenses.

Starting the second half of this year, Megawide expects to generate recurring earnings from office and retail space for lease at the Parañaque Integrated Terminal Exchange (PITX), formerly called Southwest Integrated Transport System, the public transport terminal in Parañaque, Metro Manila that the group bagged under a public-private partnership (PPP) framework.

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The bus terminal itself has started operations but leasing will only start this second semester, opening up 72,000 square meters of office space and 12,000 square meters of retail space, Megawide chair and chief executive officer Edgar Saavedra said in a press briefing on the sidelines of the company’s stockholders’ meeting on Tuesday.

As such, half of the projected annual recurring revenues from leasable space at PITX could be realized this year, Saavedra said.

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The first two of four office towers in PITX will be opened in the middle of this month.

By 2020, Megawide expects PITX to contribute at least 12 percent of cash flow as measured by earnings before interest, taxes, depreciation and amortization (EbitdA).

Eventually, the goal is to generate 50 percent of net profit out of recurring earnings, to balance the cyclical nature of the construction business.

In terms of Ebitda, such a split has been achieved as construction now accounts for less than half of total cash flow.

This 2019, Saavedra said it would be a “bounce back” year for construction, adding that revenues from this segment would likely replicate the level posted in 2017.

Megawide’s construction revenues amounted to P16.7 billion in 2017, before declining to P12.7 billion in 2018.

While Megawide’s order book hit an all-time high of P50.9 billion at end-2018, Saavedra noted that revenues were sluggish in the third and fourth quarters of 2018 as well as the first quarter of 2019.

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“It’s just a function of timing,” he said, referring to the revenue recognition cycle in the business. Construction revenues slowed as projects were in different completion stages in the order book, with some either winding down or in the early phases of construction.

This year, Megawide expects to add P20 billion to its order book, particularly from office building and other infrastructure contracts. —DORIS DUMLAO-ABADILLA

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