December 15, 2013

Megaworld eyes P15b in RFO sales in 3 years

News portal quoted an official of Megaworld Prime Properties Investment Group as saying the company is looking to generate up to P15b in revenues from the sale of ready-for-occupancy units over the next three years. About P8b of the amount will be booked this year. The vice president of sales and marketing for the RFO sale unit of Megaworld Corp (MEG, Not rated) said the company has pre-selected 5% of MEG’s total inventory that will be sold as RFO units.

Our take: We believe that the company is better off selling these units to generate cash flows instead of putting them in a pool to be rented out for yield. For one, residential rental income accounts for a miniscule portion of MEG’s total revenues.

For another, MEG’s can best use the cash flows to be generated from such sale to partially bankroll its mixed-used projects that should generate better returns. However, we are still clarifying with MEG if the projected sales of RFO units pertain to accumulated unsold units over the years or if these refer to expected number of units that are about to be completed to the determine the implications to MEG’s presales numbers. – WealthSec