Megaworld sees 20% higher profit

Property developer Megaworld Corp. expects its net profit to grow by more than 20 percent this year, mainly coming from the rentals of office space by outsourcing companies and higher sales from middle-income projects.

At the sidelines of the company’s stockholders meeting yesterday, Megaworld chairman and president Andrew Tan said revenues are likewise seen to rise by more than 30 percent this year due to escalating rentals in the office sector.

Tan said rental income has increased by 88 percent year-on-year to P454.65 million from only P241.43 million in 2003.

Megaworld executive vice-president Cirilo Manlangit said the company’s lease contracts require an increase in rates by as much as 20 percent.

Last year, Megaworld posted a net income of P759.72 million or 32.3 percent higher than the P574.21 million reported in 2003. Revenues, on the other hand, went up 21 percent to P4.21 billion from P3.48 billion.

To maintain its leadership in both the residential and BPO (business process outsourcing) market, Megaworld has set aside P4.7 billion for its capital expenditures this year.

"We remain bullish in our property development activities. We are launching two more projects within the year to meet a growing demand from the market. And we have scheduled more than a dozen office and residential projects for completion over the next four years," Tan said.

Megaworld owns Eastwood City, a 16-hectare commercial and business enclave that houses a cyberpark where many call centers and information technology firms are located.

The company had credited call centers for single-handedly raising occupancy rates and rents in office buildings during the last three years.

BNP Paribas had estimated that the BPO operations will become a $10-billion industry in the Philippines by 2009, up sharply from just a $173-million business in 2002. The government, meanwhile, projects call center operations to double seat capacity from an estimated 40,000 in 2004.

Tan said capital expenditures for these projects will be financed with internally generated funds.

Megaworld plans to spend around P25 billion over 10 years starting this year on four major property developments, including the 50-hectare Mckinley Hill project in Fort Bonifacio as well as a 25-hectare logistics center at the Villamor airbase called Newport City.

Mckinley Hill will comprise a residential subdivision, low-rise condominiums and a commercial center. The project is a 50-50 joint venture with the Alliance Global Group Inc.

On the other hand, Newport City, a joint development with the Bases Conversion Development Authority, is expected to generate P150 million in recurring income a year from an airport hotel and retail and commercial operations. Marketing of the residential section of Newport City is slated to kick off by the third quarter of the year.

Tan said more than 65 percent of the initial residential subdivision phases have been sold since the launch of Mckinley Hill just a year ago.

Another project of the company is the P15-billion Forbes Town Center, a joint development with the Bonifacio West Development Corp.

Slated for completion this year up to 2008 are The Eastwood Excelsior (2005), One Orchard Road, The Grand Eastwood Palazzo and the Eastwood Parkview. The Eastwood Excelsior is a twin-tower residential condominium building while Parkview is a Miami-style twin tower residential-cum-mall development.

Megaworld has a landbank of one million square meters, good for seven to 10 years of development excluding potential joint ventures.

During the annual meeting, company shareholders approved the increase in Megaworld’s capital stock to P20.2 billion from P13.2 billion and the planned 20-percent stock dividend declared earlier by the board.

Megaworld focuses on the middle to high-end residential and office markets. It also has 43-percent owned subsidiary Empire East that caters to the lower to middle income market segment.

The company is also into hotel operations through Prestige Hotels & Resorts Inc., a subsidiary which operates the Richmonde Hotel in the Ortigas Center.