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Friday, April 11, 2014

MEG: FY13 income meets estimates, raising FV to Php5.48

FY13 core net income up 12.54%. Megaworld’s net income for FY13 grew 23% to Php8.97 Bil. This, however, includes a non-recurring gain of Php763 Mil from a recent acquisition. Excluding this one-off gain, net income for the year jumped 12.54% to Php8.21 Bil. This is in line with COL and consensus estimates. Growth was driven by higher realized gross profit and higher rental revenues.

Residential sales weak in 4Q13 but rebounds in 1Q14. Total reservation sales of the Megaworld Group (including Suntrust and Empire East) reached Php68.2 Bil for FY13, up 8.3% from Php63Bil the year earlier. Sales were weak during the fourth quarter of last year, just Php12.2 Bil compared to Php16.5 Bil in 4Q12. We believe this was due to the natural calamities that hit the Philippines, primarily typhoon Yolanda. This was no indication of weak demand for MEG’s projects as sales rebounded in 1Q14 to Php19.6 Bil, an 8.9% improvement from 1Q13.

Unbooked revenues at Php100 Bil. According to MEG, net unbooked revenues of the company currently amount to around Php100 Bil. With this, MEG expects to book around Php88 Bil in real estate sales over the next three years. This gives us better clarity on MEG’s real estate revenue going forward. This also eases some concerns about MEG’s ability to translate reservation sales into revenues.

Raising FV estimate to Php5.48. We are raising our FV on MEG from Php4.54 to Php5.48 as we raise our valuation for MEG’s residential development segment following MEG’s statement that unbooked revenues amount to around Php100 Bil, giving us more confidence in its ability to translate reservation sales into revenues. We also raised our landbank valuation estimate as we factored in MEG’s recent land acquisitions in Pasig and Davao. Our new estimate also reflects higher land values in its existing landbank. Lastly, we also factored in MEG’s planned retail and office completions this year.




FY13 core net income up 12.54%

Megaworld’s net income for FY13 grew 23% to Php8.97 Bil. This, however, includes a non-recurring gain of Php763 Mil from a recent acquisition. Excluding this one-off gain, net income for the year jumped 12.54% to Php8.21 Bil. This is in line with COL and consensus estimates. Growth was driven by higher realized gross profit and higher rental revenues.


Realized gross profit better than expected

Net realized gross profit for FY13 was Php7.42 Bil, better than our forecast of Php6.5 Bil. This was due to higher gross margins for sales booked during the year, and also high realized gross profit on prior years’ sales. This is a good sign that MEG has been able to translate past and present real estate sales into profits. We expect this trend to continue going forward and this should improve the outlook on its residential development segment.

Rental revenues better than expected

Rental revenues had a strong 4Q13, growing by 23% y/y to Php1.7 Bil. This brought full-year rental revenues to Php6.04 Bil, beating our full-year forecast of Php5.76 Bil. We believe that strong holiday sales and completion of two more office building swith a total of 17,500sqm of GLA during the fourth quarter led to the strong revenues. We expect more of the same this year as MEG plans to add 112,000sqm to its office portfolio and 70,000sqm to its retail portfolio for a total of 621,000sqm and 240,000sqm of office and retail GLA respectively. This will drive rental revenues up by another 16,5% to Php7.04 Bil.

Residential sales weak in 4Q13 but rebounds in 1Q14

Total reservation sales of the Megaworld Group (including Suntrust and Empire East) reached Php68.2 Bil for FY13, up 8.3% from Php63Bil the year earlier. Sales were weak during the fourth quarter of last year, just Php12.2 Bil compared to Php16.5 Bil in 4Q12. We believe this was due to the natural calamities that hit the Philippines, primarily typhoon Yolanda. This was no indication of weak demand for MEG’s projects as sales rebounded in 1Q14 to Php19.6 Bil, an 8.9% improvement from 1Q13.

Source: COL Financial

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