Megawide makes market debut

MANILA, Philippines - Megawide Construction made its trading debut yesterday, closing at its initial public offering (IPO) price of P7.84, as a weak broader market clipped initial gains.

Megawide, the first IPO this year and the first by a construction company in 35 years, opened at P7.84 and rose to as much as P7.95 amid a generally bearish market.

This listless turnout is unlikely to inspire other listing hopefuls to venture into the equities market. Local stocks have declined almost eight percent so far this year, making it one of the worst performers in Southeast Asia.

Megawide raised P2.3 billion from the IPO, which was oversubscribed three times with the family of retail tycoon Henry Sy subscribing to 64 percent of the total issue, equivalent to 20 percent of the construction firm. Other groups that bought shares from the IPO were the state-owned Government Service Insurance System and Suyen Corp. of Chinese-Filipino entrepreneur Ben Chan, the founder of the country’s largest clothing chain, Bench.

Leading online brokerage firm CitisecOnline likewise bought shares from the IPO, according to Eduardo Francisco, president of BDO Capital & Investment Corp.

“The offering, which I understand was 125 percent oversubscribed by trading participants, reflects Megawide’s strong brand name and proven track record in the industry, financial strength, its philosophy of using modern and advanced construction technology and level of investor confidence in the group,” PSE chairman Cornelio T. Peralta said in his remarks during the IPO listing ceremonies.

“We are humbled and grateful as to how the market has accommodated our company, said Megawide chairman Michael Cosiquien.

The six-year old construction and engineering company, now valued at $155 million, sold 292 million shares or 34 percent of its issued and outstanding shares.

Proceeds from the IPO will be used for the construction of a P1 billion world-class pre-cast manufacturing plant in Taytay, Rizal. Scheduled to commence within the year with a target full completion in 2013, the new plant will be the country’s biggest one-stop-shop pre-cast concrete facility which will serve the undertapped low to mid-rise housing market.

“We are preparing for inevitable growth. We want to be able to serve the needs of the market,” said Megawide president Edgar Saavedra.

The company is aiming to expand its range of services to include mass housing and infrastructure construction. It is now in talks with state-owned housing agencies and private developers to deliver 200,000 quality but affordable housing units in the next five to eight years.

Over the past three years, Megawide experienced a substantial growth in its market share in the domestic building segment, accounting for 20 percent of the high-rise residential construction business. During the same period, the company had booked 22.9 billion worth of construction contracts covering approximately 1.298 million square meters floor area, consisting of 22 high-rise and 15 medium-rise condominium projects in Metro Manila.

The company expects to book P5 billion to P6 billion worth of construction contracts yearly.