Megawide’s planned P5-B bonds gets PRS Aa rating

Engineering and infrastructure firm Megawide Construction Corporation’s planned P5-billion bond offering has been assigned an Issue Credit Rating of PRS Aa, with a Stable Outlook, by Philippine Rating Services Corporation (PhilRatings).

Megawide plans to offer bonds worth P4 billion, with an oversubscription offer of up to P1 billion. It said earlier that the fixed rate peso bonds may be issued in up to three series: 3-year Series C Bonds due 2027; 5-year Series D Bonds due 2029; and 7-year Series E Bonds due 2031. 

Proceeds from the base offer will be used to refinance the Company’s existing debt obligations and for other general corporate purposes, while the oversubscription allotment will include business development opportunities.

PhilRatings said in a statement that it also maintained its Issue Credit Rating of PRS Aa, with a Stable Outlook, for Megawide’s outstanding rated bonds of P4 billion.

Obligations rated PRS Aa are of high quality and are subject to very low credit risk. The obligor’s capacity to meet its financial commitment on the obligation is very strong. 

A Stable Outlook, on the other hand, indicates that the assigned rating is likely to be maintained or to remain unchanged in the next 12 months.

PhilRatings said the assigned ratings took into account Megawide’s solid experience in the construction industry, along with vertically integrated operations, that are seen to complement the government’s infrastructure projects.

Also factored in the rating is the firm’s notable expansion projects in recent years, with the aim of diversifying into less cyclical sources of revenues, and the favorable industry outlook and opportunities, backed by the government’s infrastructure projects.

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Also considered is the rebound in Megawide’s earnings, albeit with easing margins attributed to a strategic approach, and its improved leverage levels.

Megawide, together with its Japanese partners Tokyu Construction and Tobishima Corp., has officially signed Contract Package (CP-104) of the Metro Manila Subway Project, with an aggregate contract value of P17.75 billion. 

Such includes the construction of underground stations in Ortigas North and South, as well as the tunnels connecting these two locations. This project is seen to facilitate Megawide’s diversification into railway systems.

The company sees various opportunities in private domestic real estate construction, public infrastructure projects, and transport-oriented developments, specifically in terms of fast-tracking and participating in the country’s infrastructure modernization through the government’s initiative under its “Build Better More” (BBM) program. 

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It also aims to strengthen its portfolio towards more responsive, scalable, and higher growth segments.

PhilRatings noted, however, that gross margins from continuing operations (excluding airport operations) had been easing, from 17 percent in 2020 to 11.7 percent in 2023. 

According to Megawide, this was the outcome of the company’s calculated strategy to secure longer-term, higher-value, and big-ticket projects that provide more revenue predictability, as well as the impact of reportedly industry-wide low office occupancy affecting landport operations. 

Going forward, Megawide expects to stabilize this downtrend in margins, as it focuses on higher margin businesses, which include the newly-acquired property development arm, external market penetration of its Pre-Cast and Construction Solutions (PCS) unit, and improvement in landport operations.

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The article was originally published in Manila BUlletin and written by James A. Loyola.

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