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Wednesday, September 16, 2015

Megaworld Corporation: Improved visibility on leasing expansion

We reiterate our BUY rating on MEG. We like MEG for the continuous expansion of its rental income portfolio. Based on the company’s expansion plans, total leasing portfolio will increase at a CAGR of 16.7% from 791,000sqm as of end 2014 to 1.7 Mil sqm by end 2019. Moreover, at its current price of Php4.30, MEG is trading at a steep 47.7% discount to NAV. Furthermore, MEG is trading at only 13.56X FY15 P/E, less than half of ALI’s current FY15E P/E of 30.5X. This is despite the fact that MEG is growing its more defensive rental income portfolio which should strengthen the company’s ability to withstand economic downturns going forward. As of FY14, operating profit from MEG’s leasing business accounted for 43% of consolidated operating profit, already larger compared to 32% for ALI. See full report here.

- Col Financial

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