Megaworld eyes P10B from stock rights offering

Upscale property developer Megaworld Corp. seeks to raise at least P10 billion from its proposed stock rights offering within the first quarter of 2007.

A company official said bulk of the sales, or about P4 billion, will go to the development of the hotel, retail and office components of Cityplace, Megaworld’s first project in Manila’s Chinatown district. About P3 billion has been earmarked for landbanking activities, P2 billion for working capital requirements and the remaining P1 billion for the continued expansion of its business process outsourcing (BPO) office space in Eastwood City in Libis.

The company is building E-Commerce Plaza within Eastwood to meet the growing demand for BPO space.

The planned offering will involve 7.37 billion common shares to be sold at a 10 to 50 percent discount to the closing price of Megaworld common shares on the pricing date, which is to be set after the stock exchange approves the listing.

Shareholders may subscribe to one rights share for every two common shares they hold. The record date will not be less than 15 trading days after the approval of the application.

The rights shares will come partly from the company’s unissued authorized capital stock and its P10 billion increase in capitalization. Megaworld’s share price has risen by as much 98.33 percent since the start of the year, reflecting the strong investor confidence in the company’s stock. It, however, fell to as low as P1.90 on fears that the stock rights offer would have a dilutive effect but the stock is now back to the P2 level, after closing at P2.10 yesterday.

The company expects its net profit to increase by at least 50 percent next year should it complete its planned stock rights issue within the first quarter of 2007. "We look at it as an imperative measure that will empower us to take advantage of the increasingly favorable conditions and opportunities in the Philippine property market," said Megaworld chairman and president Andrew Tan.

Tan views the stock rights offer as an "opportune undertaking that will help Megaworld maintain a leadership position in two robust segments of the property market: residential condominium and business process outsourcing."

Banking on the robust performance of all its residential and office building projects, Megaworld Corp. is eyeing a 66 percent growth in its net profit this year to P1.9 billion from only P1.17 billion a year earlier.

For the first nine months of the year, Megaworld’s net income amounted to P1.5 billion, 92 percent higher than the previous level. Revenues jumped 62 percent to P6.4 billion, mainly driven by strong real estate sales of residential condominium projects in its large-scale developments such as McKinley Hill and Forbes Town Center in Fort Bonifacio, Taguig City, and Eastwood in Quezon City.

As part of efforts to further boost profitability, Megaworld inked an agreement with Security Bank for a home financing facility to be made available to its clients at terms of up to 25 years.

The facility is expected to make home ownership affordable for many first-time buyers and is expected to generate more sales for the company.

Megaworld also earlier teamed up with Deutsche Bank unit RREEF to study the creation of "the country’s first structured end-to-end mortgage financing program" exclusive for Megaworld’s real estate projects.

Megaworld has set aside $1.2 billion over the next five years for the development of BPO buildings and new township projects aimed at further igniting growth within the company. It announced plans to spend at least P6 billion to P7 billion annually in the next five years for all its projects.

Other mega projects of the company in Metro Manila include Newport City in Pasay City and Manhattan Garden City at Araneta Center in Cubao, Quezon City.