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

Megaworld to expand office space leasing business

Megaworld's Iloilo business park perspective

Megaworld Corp is accelerating its office space launches within the next three to five years.

Megaworld senior vice president Jericho Go said the company is bringing to the market over 100,000 square meters of office space within its township projects.

"On an annual basis, we have set a minimum of 100,000 square meters [in terms of launches]. Hopefully by January after the corporate planning conference, we've bumped up our 100,000 to 150,000 or something better. Moving forward, that will be the trend," Go said during an interview before the holiday break.

Megaworld added 112,000 square meters to its office space portfolio to close 2014 with 712,000 square meters upon completion of Towers 1 and 2 in Uptown Bonifacio and of projects in Mactan Newton and Iloilo Business Park, according to analyst estimates.

Megaworld has launched roughly 60,0000 to 75,000 square meters of office space in the last 3-5 years, Go said, adding that its office projects in its township developments in Metro Manila as well as Cebu and Iloilo are mostly fully leased out.

Go said the take up of office space in recent years has been “phenomenal” with a lot of business process outsourcing (BPO) companies entering into pre-commitment deals with developers, something "unheard of in terms of office space."

"If they don't do that now, they will be left behind. It's possible that their competitors will be taking that space to begin with. If that happens they will be left fighting for limited space at a higher price. Prudence dictates ‘I sign up for this space now, I pay now and lock in the price,’" Go said.

Megaworld nearly tripled its earnings to P19.03 billion at end-September buoyed by an P11.62-billion non-recurring gain, strong residential sales in its various townships, and higher leasing income from its office and retail portfolio.

Megaworld is part of Alliance Global Group Inc, the holding firm for billionaire Andrew Tan’s real estate, consumer goods, quick service restaurants, hotel and gaming businesses.

- Interaksyon

Beverly Hills meets Alabang in Megaworld's latest township project

Megaworld Corp has launched a Beverly Hills-themed township development in Alabang.

In a briefing on Monday, Megaworld senior vice president Jericho P. Go said the company, through Global Estate Resorts Inc, is pouring P10 billion in the next five years to develop the 62-hectare Alabang West, its 15th township project in the country.

Located along Daang Hari, Megaworld will incorporate a Beverly Hills-themed lifestyle concept into its commercial and residential developments.

Alabang West will house an exclusive village offering 788 lots starting at P48,000 per square meter. Of the total number of lots, 150-160 lots were already taken up, said Megaworld Global Estate Inc vice president for sales and marketing Mary Rachelle I. Penaflorida.

Owned by billionaire Andrew Tan, Megaworld expects to sell out the lots ranging from 244 to 795 hectares in Alabang West in the next 6-12 months.

The Megaworld Group is looking at Alabang as the next business district, where land values are considerably cheaper compared to Bonifacio Global City.

"The demand is quite high because our track record is very phenomenal," Penaflorida said.

Megaworld started selling projects in McKinley Hill and McKinley West in Fort Bonifacio at P50,000 per square meter in 2005 and P75,000 per square meter in 2010. Current prices in those projects have grown significantly to P120,000 per square meter and P160,000 per square meter, respectively.

Despite rising interest rates, Megaworld continues to be upbeat on its outlook for the real estate sector because of its sizable land bank in accessible locations.

"Prospects are very bright for Megaworld and our affiliated companies. We are very market-driven. We probably would have thought a little more if we did not very well in Pahara, but we did very well in Pahara so we were encouraged to launch more projects," Go said.

Go was referring to Southwoods City's Pahara project, which is almost 90 percent sold since its launch in February this year. Lots in Pahara are now selling at an average of P19,000 per square meter from the initial selling price of P14,000 per square meter.

Located beside Alabang West Village is a 1.3-kilometer commercial and retail row, inspired by Hollwood’s famous Rodeo Drive.

The village will have a huge clubhouse complex with amenities that include badminton and basketball courts, function rooms, cabanas, game room, café and al fresco dining areas, a fitness center, pocket gardens, open space parks, infinity pool, among others.

Strategically located at the heart of Alabang’s high-end communities and golf course, Alabang West is accessible through the major access points of the South Luzon Expressway-Alabang Exit and the upcoming Daang Hari Exit.

- Interaksyon

Megaworld Leads Philippine Developers Higher as Land Values Leap

Megaworld Corp. (MEG) shares jumped to a record, leading Philippine developers higher, as the government sold land in Greater Manila at higher-than-expected prices.

Megaworld soared 8.3 percent at the close in Manila, after rising as much as 11 percent earlier. The stock was the biggest percentage gainer today in the Philippine Stock Exchange Index (PCOMP), which rose 1.2 percent to its highest close in 16 months.

The government yesterday auctioned two plots of 1,600 square meters each in the former army camp of Bonifacio for 732.8 million pesos ($16.5 million) and 800 million pesos. The average sale price of 479,000 pesos per square meter for those two plots is higher than analysts’ estimates of 280,000 pesos per square meter in Bonifacio, according to Noel Reyes, chief investment officer at Security Bank Corp. Megaworld owns 105 hectares in the area.

“Investors are anticipating a significant adjustment in the valuation of companies with properties in Bonifacio,” Reyes said by phone in Manila today. “The expectation is there will be a big increase in the values of land in Bonifacio.”

Megaworld’s projects in Bonifacio include the 50-hectare McKinley Hill, a residential, office and commercial project, according to John Hao, the builder’s investor relations officer.
Repercussion

“Bonifacio land values will increase from this transaction and will have repercussion on rent and prices,” said Rommel Rodrigo, a Manila-based analyst at Maybank ATR Kim Eng, said by phone. “Megaworld is seen as a prime beneficiary because of the size of its exposure in Bonifacio. It’s Bonifacio’s biggest landlord.”

Rodrigo, who has a buy rating on Megaworld shares, said he is reviewing the 180,000 peso to 200,000 peso a square meter valuation range he uses for land in Bonifacio.

Shares of Alliance Global Group Inc. (AGI), parent of Megaworld, climbed 3.4 percent to a two-week high. Ayala Land Inc., the developer of the Fort Bonifacio Global City project, advanced to a 15-month high, while SM Prime Holdings Inc., which owns a mall in the district, rose 3 percent. GT Capital Holdings Inc., which owns land in Bonifacio through a property unit, added 1.3 percent to a record.

The Philippine Stock Exchange Property Index, a measure of the nation’s largest developers, rallied 3.6 percent, the sharpest gain in more than a year. The gauge has increased 31 percent this year, outpacing the benchmark equities index’s 25 percent advance.

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editors responsible for this story: Michael Patterson at mpatterson10@bloomberg.net Phani Varahabhotla

- http://www.businessweek.com/news/2014-09-24/megaworld-leads-philippine-developers-higher-as-land-values-leap

Megaworld Corporation: So far so good

Source: Col Financial

MEG: Acquires majority stake in GERI

MEG has ventured into the tourism business with the acquisition of an 80.4% stake in Global-Estate Resorts, Inc. (GERI), the country’s biggest tourism estate developer. The acquisition added 3,000ha to MEG’s land bank bringing the company’s total land bank close to 4,000ha. The acquisition also includes GERI’s properties in Tagaytay, Alabang, Iloilo, Cagayan de Oro and Boracay. Among GERI’s biggest projects is the 1,149ha Twin Lakes integrated tourism estate in Tagaytay. In Boracay, GERI is developing the 150ha Boracay Newcoast which occupies 14% of the entire island. GERI is also developing the 561ha Southwoods City, envisioned to be the next central business district south of Manila. Finally, GERI has a 170ha township being developed in Iloilo called Sta. Barbara Heights which will be connected to the new Iloilo International Airport. We currently have a BUY rating on MEG with a FV of 5.48.

- Col Financial

Megaworld earmarks P230 for capex until 2018

Megaworld Corp has set a P230-billion, five-year warchest for the expansion of all its real estate products across its various township developments in the country.

On the sidelines of the company's 20th listing ceremony, Megaworld senior vice president Jericho P. Go said the condo developer's capital expenditure (capex) until 2018 will be used to beef up its residential, office, hotels, commercial and retail projects as well as its land bank of 300 hectares.

Of the total capex, P40 billion will be earmarked for expansion this year, said Megaworld investor relations officer John Hao. The subsidiary of Alliance Global Group Inc will fund its five-year spending program through internally generated funds and debt issuances.

The total capex excludes the spending program of Megaworld's middle-income arm, Empire East Land Holdings, and affordable housing developer, Suntrust Properties.

"As we continue to break old records and set new trends in the Philippine property market, we are motivated to work even harder to maintain our leadership position as the no. 1 residential condominium developer and BPO office landlord in the country,” said Megaworld chairman Andrew Tan.

Megaworld is set to roll out an average of at least 10 residential projects and six office towers every year. It is also expected to open new commercial spaces in Quezon City, Taguig City, Makati City, Cebu, Iloilo and Davao in the next five years.

Megaworld has allocated P80 billion to develop its townships in Iloilo, Cebu and Davao in the next 10 years.

By 2018, rental income will account for bulk of earnings with a share of 50 percent, up from its current share of 40 percent, while the contribution of residential development will go down to 40-45 percent.

Megaworld is on track to have one million square meters of office space in the next five years, Go said.

"We have more opportunities to pursue. In terms of track record, we have a very good upward," Go said.

A pioneering developer of live-work-play lifestyle concepts, Megaworld introduced this year its newest township in Woodside City, a P35-billion "green" township development along C5 in Pasig City. It also launched Davao Park District, its first township in Mindanao and is positioned to be a central business district.

Aside from building new mixed-use projects, Megaworld has announced the expansion of Eastwood City in Quezon City and The Mactan Newtown in Lapu-Lapu City.

The real estate firm expects earnings to grow by double digits this year, Hao said. The firm's earnings climbed by nearly half to P2.69 billion in the first quarter from P1.81 billion in 2013 on the strength of its property development and leasing businesses, coupled with extraordinary gains.

In the last five years, the company posted a compounded annual growth rate of 18-20 percent.

Megaworld has become the holding firm for Tan's real estate assets following the consolidation of Empire East and Suntrust Properties, allowing the company to capitalize on real estate opportunities and to capture the expected growth momentum of its affiliates.

Megaworld is also acquiring AGI's stake in GERI, paving the way for completion of the consolidation process of all real estate businesses under the Megaworld brand.

- Interaksyon

Megaworld to expand Eastwood City

Megaworld Corp is beefing up its first cyber park in the Philippines with the expansion of Eastwood City, capitalizing on the robust demand for office and commercial spaces in the township in Libis, Quezon City.

In a briefing, Megaworld senior vice president Jericho P. Go said the holding firm for the real estate businesses of Alliance Global Group Inc is adding 1.5 hectares to Eastwood City with the acquisition of a property located on the eastern part of the township along Eastwood Palmtree Avenue beside the Eastwood Le Grand Tower 3.

The acquisition will bring the total land area of Eastwood City to 18.5 hectares from the existing 17 hectares.

Megaworld is lining up at least three high-rise towers that will combine residential, office and commercial components in a cluster. This marks the first time that the real estate developer will develop a mixed-use tower offering a "city within a building" outside two projects in Cebu.

The first phase of the expansion over a four-year period will accommodate around 100,000 square meters of office spaces, generating direct and indirect employment for 200,000 people.

"The advantage of Eastwood City particularly on the BPO side is there is pent up demand for 30,000 to 50,000 square meters of office space. They are just waiting for that building to be right there," Go said.

The expansion area will also accommodate 600 residential units and 9,000 square meters of commercial space with all towers having leasable commercial spaces at the ground levels.

After the acquisition of the 1.5-hectare property, Megaworld is scouting for more land to expand its township, said Harold C. Geronimo, head of the company’s communications group.

In the last 15 years, Megaworld has transformed the former textile mill into Eastwood City, its pioneering "live-work-play" mixed-use township that gave birth to the booming business outsourcing industry, one of the drivers of the Philippine economy, said Geronimo.

Today, Eastwood City is home to about 60,000 IT and BPO workers in 59 companies, making it the biggest cyberpark in the Philippines in terms of workforce. It is also home to around 25,000 residents and about 500 commercial and retail partners.

Eastwood already has 10 office buildings, 19 residential condominium towers, three lifestyle malls with an average daily foot traffic of 100,000 and the Eastwood Richmonde Hotel.

 

- Interaksyon

MEGAWORLD CORPROATION (MEG): Offers to acquire AGI’s stake in GERI

MEG to acquire GERI stake from AGI. MEG has agreed to purchase the 49.20% stake of Alliance Global Inc. (AGI) in Global-Estate Resorts (GERI) for a total purchase price of Php10.43 Bil or Php1.93 per share. After the acquisition, MEG will own 74.96% of GERI and will initiate a mandatory tender offer for the remaining GERI shares held by minority shareholders at Php1.93 per share.

Financing not a problem. MEG will pay for the transaction in cash as it has Php31.75 Bil in cash and cash equivalents as of end FY13. MEG may temporarily have to borrow around Php7 Bil but this should not be a problem for the company. MEG has expressed plans to sell its 8.99% stake in RWM which is valued at Php13.82 Bil based on the current market price of RWM. The sale of this would put MEG back in net cash position.

Consolidation complete.The acquisition will complete the consolidation of all real estate businesses of AGI under MEG, enabling MEG to capitalize on growth opportunities of the property market. We have no changes in our fair value estimate for MEG at this point but we believe this will be NAV accretive to MEG as the company is in a better position to unlock the value of GERI’s landbank through future developments.

Reiterate BUY on MEG. We reiterate our BUY rating on MEG with a fair value estimate of Php5.48.

- Col Financial