Megaworld says 56% profit drop still ‘manageable’

MEGAWORLD CORP. saw its second-quarter net income dive by 56% to P2.1 billion as the coronavirus pandemic-induced lockdown affected its businesses.

The decline brought down its net profit in the first six months of 2020 by 34% to P5.9 billion with total revenues sliding by more than a quarter to P23.8 billion compared to its 2019 first-half record, the property developer said in stock exchange disclosure, Thursday.

However, the quarter profit drop “wasn’t as bad” as expected, and remains “manageable,” according to Megaworld’s Chief Strategy Officer Kevin L. Tan.

Megaworld’s leasing business, which delivered a 78% share to its rental income, is its only segment that saw improvements in earnings. Megaworld Premier Offices earned P5.6 billion between January and June, a 10% increase over a year ago, offsetting the impact of the partially shuttered Megaworld Lifestyle Malls.

“Our strategic decision of further strengthening our office leasing business way before the pandemic started is now evidently making us more resilient,” Mr. Tan said.

Megaworld is set to complete five more office developments by year’s end, adding 213,000 square meters to its portfolio of completed leasable offices. These include: Iloilo Business Park in Iloilo City, Arcovia City in Pasig City, Westside City in Parañaque City, McKinley West and Uptown Bonifacio in Taguig City.

So far, these ongoing projects are already 90% pre-leased on average.

Mr. Tan noted that business process outsourcing (BPO) firms and traditional offices, including the headquarters of multinational companies, still occupy around 90% of its spaces.

However, it is closing some deals from BPO companies in Metro Manila that are expanding in provincial townships, where quarantine policies are more relaxed to continue operations.

“Our current portfolio of active BPO tenant partners is still huge, and these are our first-line takers in our provincial developments,” he said.

By yearend, the listed property developer will have 70 completed offices covering 1.4 million square meters of inventory, sans those units sold.

Overall rental income in the first semester went down by over a tenth to P7.2 billion year on year.

Meanwhile, Megaworld recorded a 29% decline in hotel revenues to P917.9 million. During the lockdown, it operated 10 hotels with around 3,500 rooms serving pre-booked guests from BPO firms and returning overseas workers.

It claimed reservation sales peaked during the quarter, hitting P38 billion, despite the quarantine restricting selling activities for residential projects.

Enforcing more flexibility in payment terms brought its real estate sales in the first half down by 29% to P14.3 billion.

Shares in Megaworld slightly went up 1.01% to close at P3.01 apiece on Thursday. — Adam J. Ang

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Article and Photo originally posted by Business World last August 14, 2020 12:08am.