Megawide’s ₱4 Billion Bond Issue Gets Top Rating

Top infra company Megawide Construction Corporation’s proposed P4 billion bond issue has been assigned a top credit rating by Philippine Rating Services Corp of PRS Aa indicating low credit risk.

Photo Insert: Megawide has built a solid reputation as one of the top companies in the Philippine construction and infrastructure sector.

The assigned issue rating took into account Megawide’s solid experience in the construction industry, along with vertically integrated operations, that is seen to complement the government’s infrastructure projects through the Public Private Partnership (PPP) and Build, Build, Build (BBB) programs.

Also, the rating agency cited the notable expansion projects of the company in recent years as well as its aim of diversifying into less cyclical sources of revenues following the effects of the COVID-19 pandemic.

The assigned rating also took into account the recovering economy amid declining COVID-19 cases and increasing vaccination rates.

Megawide has built a solid reputation as one of the top companies in the Philippine construction and infrastructure sector. Since 2008, Megawide completed over 85 projects, with a total contract value amounting to ₱142.0 billion as of the third quarter of 2021 (3Q2021).

Megawide has an AAAA Contractor’s License from the Philippine Contractors Accreditation Board (PCAB) – the highest classification and category for a construction company – which qualifies them to bid for private projects with no limits on contract value. Likewise, Megawide maintains a Large B classification for government registration, allowing it to participate in large-scale infrastructure projects.

Over the last decade, Megawide won four different PPP infrastructure projects across different administrations. This track record offers the Company an edge and familiarity with government processes when it participates in bidding for future projects. As such, Megawide believes it is in a good position to be awarded big-ticket projects in the infrastructure space, even with a new administration coming in

this year.

Consolidated revenues in 3M2022 amounted to ₱4.16 billion, 12% higher than the amount for the same period last year. The construction segment revenue continued to be the major revenue contributor, as it registered an amount of ₱3.79 billion in the period, an 11% increase from 3M2021.

Revenues from Megawide’s airport segment, together with its airport merchandising segment, grew by more than two times, from ₱115.08 million in 3M2021 to ₱238.93 million in 3M2022. Passenger volume more than doubled from the year-ago level, although such has not yet breached the pre-pandemic level.

Landport operations delivered revenues of ₱130.77 million, a 30% decrease from ₱187.02 million in 3M2021, driven by continued lower office occupancy. Net loss in 3M2022 amounted to ₱279.89 million, higher than the net loss incurred in 3M2021, due to tax expenses incurred compared with tax credits in the previous year. Profitability is expected to recover in the succeeding years, as domestic and international traffic at Mactan Cebu International Airport (MCIA) is projected to sustain a strong rebound.

The listed Megawide firm also plans to enter new segments to provide a strong, stable, and growing revenue stream in the long run. The program includes a foray into horizontal infrastructure by participating in the government’s various rail infrastructure projects to complement its order book from the private sector.

Profitability is expected to recover in the succeeding years, as domestic and international traffic at Mactan Cebu International Airport (MCIA) is projected to sustain a strong rebound. The airport and landport segments, which are project companies, normally have a high gearing ratio due to a capital-intensive nature but are typically under project financing.

These project companies are distinct in terms of their liabilities to the Parent Company. On a consolidated basis, the debt-to-equity (DE) ratio peaked in 2019, at 2.65x, due to availing of loans to support working capital expenditures and the construction of the Clark International Airport (CIA).

Given the recovering economy, total revenues in the projected period exhibit an upward trend. The construction segment will continue to be Megawide’s main driver and enabler. Bulk of the revenues will come from existing contracts from vertical and horizontal developments, as well as major infrastructure.

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