November 24, 2013

SEC approves Megaworld’s capital hike

In a disclosure, Megaworld Corp (MEG) said the SEC has approved its application to increase its authorized capital stock by P10b to ~P40b. Parent company Alliance Global Group Inc (AGI, Buy) has earlier subscribed to 25% of the capital hike at P4.29/sh and immediately paid 25% of the amount. The remaining balance will be paid upon SEC approval of the capital hike.

Our take: Despite being in a net cash position, MEG proceeded with the capital hike to finance “project development, land acquisition and other corporate purposes” including investments into Global Estates Resorts Inc (GERI, Not rated) and other property assets of the group. MEG plans to consolidate the other property assets of the group (similar what SM Prime did with the property assets of the SM group) in a bid to become a diversified property company.

What should bear watching though is if and when MEG will issue the remaining P7.5b of the P10b capital hike as this would result in further steep dilution for shareholders. The capital hike followed last year’s completion of a two-step rights issuance and warrant conversion that expanded the capital base by about 42% since 2009. – WealthSec