ACCORD CAPITAL EQUITIES CORPORATION
GF EC-058B East Tower, PSE Center, Exchange Road, Ortigas Center, Pasig City, PHILIPPINES 1605 (632)687-5071 (trunk)
MARKET NOTES_MEGAWIDE CONSTRUCTION CORPORATION [pse: MWIDE]
The Company was incorporated in 2004 to engage in the general construction business. It includesconstructing, enlarging, repairing or engaging in any work upon buildings, houses and condominium,roads, plants, bridges, piers, waterworks, railroads and other structures and to own, use, improve, developreal estate of all kinds.Since 2008, the Company has completed a number of projectswith an aggregate value of php2.3 billion. SMDC, the propertydevelopment firm of the SM Group, is MWIDE's biggestcustomer, accounting for 72% of its Construction Order Booklast year. It is in this context that the Company is currently intalks with new potential clients to diversify its client base andminimize concentration risk. It's other customers includelisted-property and gaming firm, Belle Corporation [pse: BEL] ,Prince Jun Development Corporation (PJDC), Malate BayviewDevelopment Corporation (MBDC), Antel Land Holdings (ALH)and the Bellevue Group (BG.) PJDC is the second largestcustomer with 9% of the Order Book.The Company has a long list of projects due to completed withinthe next three years to 2013. For the balance of 2011 alone,there are at least eight (8) developments due to be turned overto the owner at completion. The estimated value of these 2011projects is roughly php4.5 billion. Assuming the Companymerely achieves the same margins it did last year of almost8.0%, this will translate to a net income of php315 to php320million, putting it on track to meeting its upward adjustedearnings guidance of between php720 million to php800 million.The figure does not include the revenue still to be recognizedfrom project backlogs, which at the end of December 2010,amounted to php14.2 billion. Assuming only half of these arerealized and the other lost to penalties or other delaysassessment (depending on the contract provisions), a mere 7%margin translates to an additional earnings of php500 million. Inthis context, the guidance may even look conservative.
FINANCIAL AND OPERATING PERFORMANCE:
The Company's 2010 Net Income expanded three-fold to php335million compared to prior year's total of only php71 million. Acombination of project completions and new projects acquiredand started, made such result possible.The Company's Order Book has registered strong growth fromonly php3.07 billion in 2008 to php14.0 billion last year. This translates to a 2-year compound growth of 113.5%, or a doubling of orders per year. This gains more significance when taken in the context of a general economic slowdown in 2008 and 2009. Weobserve significant improvements across all Key Performance Indicators tabled above.Lending more confidence in the prospects of MWIDE moving forward is a recent BSP Business Sentiment Survey which, althoughshowing a slight dip in optimism, points to the Construction sector as being still the most optimistic across all sectors. The dragwas presented by the perceived slow disbursements of funds for government's infrastructure projects under the PPP scheme, therationalization of other government programs in an effort to bring down costs and generate savings plus the rising costs of
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