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Megawide expects income growth to be flat this year

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MMPADILLO

By Arra B. Francia, Senior Reporter

DIVERSIFIED engineering conglomerate Megawide Construction Corp. sees flat net income growth for 2019, as it expects lower contributions from its airport business.

Megawide Chairman, President, and Chief Executive Officer Edgar B. Saavedra said they will see a recovery in the construction business this year but this will be offset by the weaker performance of the airport segment.

“Flat siya sa consolidated because airport, full-year ang depreciation and interest expense recognition. That’s a factor also,” Mr. Saavedra said in a press conference before its annual stockholders’ meeting in Pasig Tuesday.

The listed firm operates the Mactan-Cebu International Airport (MCIA) Terminal 2, which opened in July last year. The new terminal increased the airport’s capacity by 4.5 million to 12.5 million passengers annually. It also has 6,000 square meters (sq.m.) in gross leasable area (GLA) for retailers.

Meanwhile, the construction business is seen to bounce back to its 2017 level, where it contributed P1.08 billion to consolidated net income. The construction segment generated a profit of P763 million in 2018, 30% lower year on year, due to delays in the start of some contracts.




“We’re looking at 2019 to recover, same as two years ago in 2017. Then in 2020, dun ang mas mataas,” Mr. Saavedra said.

The top executive said Megawide expects to add P20 billion worth of new contracts to their order book this year, coming from a combination of office buildings and infrastructure projects.

Megawide’s third business segment, which comes from the operations of the Parañaque Integrated Terminal Exchange (PITX), has yet to contribute significant revenues for the company. It expects the business to account for at least 12% of EBITDA (earnings before interest, taxation, depreciation, and amortization).

Aside from the terminal that has a daily capacity of up to 100,000 passengers, Megawide will also generate revenues from PITX’s retail areas. It will house four office towers covering 72,000 sq.m. of GLA, in addition to 12,000 sq.m. for retail and commercial spaces.

“This year, we’re doing the operation of terminal. Lease rental will start second and third quarter, so full annual revenue will start next year pa. But we’ll collect half this year,” Mr. Saavedra explained, adding that the first two towers will open in the middle of July.

The PITX will also help the company achieve its goal of having a 50-50 contribution from recurring income sources and the construction business, as Megawide looks to combat the cyclicality in the latter.

UNSOLICITED PROPOSALS
Mr. Saavedra said they continue to be active in participating in the government’s infrastructure program through unsolicited proposals. The company currently has proposals pending with the National Economic and Development Authority, such as the construction for the second runway of the MCIA.

The company also looks to develop its expertise in operating transport terminals like PITX, with the aim of duplicating such projects.

“Eventually we can duplicate that, not only in Metro Manila, even in other cities such as Cebu, and second tier cities. We think we need this kind of transportation system to solve most of the traffic issue we have, not limited to Manila, even in other cities in the Philippines,” Mr. Saavedra said.

He added that the construction of new terminals can be done through local private public partnerships.

Shares in Megawide went up 0.52% or 10 centavos to close at P19 each at the stock exchange on Tuesday.

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