{"id":323280,"date":"2023-05-22T23:32:22","date_gmt":"2023-05-22T15:32:22","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=323280"},"modified":"2023-05-22T23:32:24","modified_gmt":"2023-05-22T15:32:24","slug":"stock-in-focus-megaworld-corp-meg-23-may-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-megaworld-corp-meg-23-may-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Megaworld Corp. (MEG) – 23 May 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>MEG<\/td><\/tr>
Company Name<\/strong><\/td>Megaworld Corp.<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>23 May 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 2.60<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

We maintain our BUY rating on MEG with a target price of Php2.60, which offers a share price upside of 29.4%. We think that its current price offers an attractive entry point as the stock trades at a discount-to-NAV of 84% (vs. 5-year historical average of 75%).<\/p>\n\n\n\n

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Analysis and Opinion<\/h2>\n\n\n\n

MEG\u2019s office business should continue to outperform<\/strong><\/p>\n\n\n\n

MEG booked 1st quarter (1Q) 2023 net income of Php4.1 billion, up 33% year-on-year (y\/y), on track to meet our estimates. We think that the company would be able to sustain its residential recovery momentum. While the rising work-from-home (WFH) could potentially limit office take-up over the long-term, we reiterate our view that MEG\u2019s office business should continue to outperform the industry. Its office occupancy (90%) remains above industry-average (80%) since its office buildings and its pipeline are mostly located in high demand areas such as BGC and Iloilo.<\/p>\n\n\n\n

2023-2024 core net income CAGR of 9%<\/strong><\/p>\n\n\n\n

We maintain our forecasted 2023-2024 core net income CAGR of 9%, with 2024 core net income exceeding 2019 core net income of Php17.2 billion. Our forecasts reflects the following: (i) 2023\/2024 residential revenue growth of 10%\/6% on the back of faster construction progress with moderated sales cancellations, (ii) 2023\/2024 office revenue growth of 8%\/7% on sustained rental escalations and incremental income contribution from new tenants from its office pipeline, (iii) 2023\/2024 mall revenue growth of 32%\/12% on improved mall occupancy and as the company starts charging full mall rent in Jan. 2023, and (iv) 2023\/2024 hotel revenue growth of 30%\/18% on global reopening and resurgence of MICE activities.<\/p>\n\n\n\n

Pre-sales remained robust; management retains positive outlook<\/strong><\/p>\n\n\n\n

1Q 2023 residential pre-sales surged 71% y\/y and 19% q\/q to Php39.6 billion driven by demand for projects in McKinley West and Uptown Bonifacio, Taguig City. Project launches stood at Php13.9 billion, most of which were vertical launches in the provincial areas. Management maintained its 2023 guidance of Php130 billion in pre-sales and Php60 billion in project launches.<\/p>\n\n\n\n

Office occupancy dipped but office revenues sustained growth<\/strong><\/p>\n\n\n\n

Office revenues in 1Q 2023 grew 5% y\/y but flat quarter-on-quarter (q\/q) to Php3.1bn. However, office occupancy as of 1Q 2023 dipped 2.0ppts y\/y and 1.0ppt q\/q to 90% as one of its tenants downsized their office take-up due to the WFH setup. On the bright side, its International Finance Center (IFC) office building in BCG is set to be completed in 2023 (earlier than the 2024 est. completion previously guided by management) and is already more than 60% pre-leased (vs. 50% disclosed as of end-2022).<\/p>\n\n\n\n

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Check how many brokers recommend this stock<\/h2>\n\n\n\n
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All Stock Rankings<\/a><\/blockquote>