Megaworld to add unit to its books

Property developer Megaworld Corp. plans to consolidate into its books beginning this second quarter the operations of its middle-income real estate subsidiary, Empire East Land Holdings Inc.

In a disclosure yesterday to the Philippine Stock Exchange, Megaworld said that based on securities regulations, it is required to fold 50.02-percent owned Empire East into its consolidated financial statements.

“In compliance with the SEC (Securities and Exchange Commission) accounting rules, once Megaworld owns more than 50 percent of Empire East, it has to consolidate Empire East in its audited financial statements.  On the part of Empire East, we view the move of Megaworld as a vote of confidence, given the remarkable performance of Empire East amid changing economic conditions through the years,” Empire East president Charlemagne Yu said in a text message.

Empire East shares were up by 4.2 percent to P0.73 on Friday, giving it a market capitalization of P7.3 billion.

On the other hand, Megaworld and parent firm Alliance Global Group Inc. were down by 3.8 percent and 2.7 percent, respectively.

Jose Mari Lacson, head of research of local stock brokerage firm Campos Lanuza & Co., said Empire East shares had risen because it meant that Megaworld was buying shares.

“Empire East is fundamentally OK and based on the strategic direction for 2011, is one of the revenue growth drivers for Megaworld,” Lacson said.

Megaworld’s decline Friday, Lacson said, had more do with the takeover by Century Properties group of East Asia Power.

“Our view is that if Century does make a backdoor listing, it will join the group of key property stocks in the sector. If it does, then it means that the portfolios of fund managers have to be recalibrated to include Century and the most to suffer is its most comparable peer,” Lacson said.

“In our view, Megaworld is the most comparable because they have the same product class or market -high-end residential condominiums. In terms of portfolio weightings, Century may take some market share of the aggregate portfolio allocation for the Philippine property sector away from the existing players with Megaworld being the most sensitive,” he said.  Doris C. Dumlao