Megaworld’s 34% profit drop ‘not as bad as expected,’ thanks to BPOs

Andrew Tan-led property giant Megaworld Corp. said Thursday its office leasing business, mostly by business process outsourcing (BPO) firms, helped it cushion the impact of the COVID-19 pandemic during the first half of 2020.

In a disclosure to the Philippine Stock Exchange, Megaworld said it booked a net income of P5.9 billion during the period, down 34% from P8.9 billion year-on-year.

Consolidated revenues, likewise, declined 25% to P23.8 billion from P31.7 billion.

“Just as the pandemic began in the last month of the first quarter, we already anticipated a decline in our earnings in the second quarter, but what actually surprised us was the fact that the drop wasn’t as bad as we have expected it to be, and it remains manageable,” Megaworld chief strategy officer Kevin Tan said,

“Our strategic decision of further strengthening our office leasing business way before the pandemic started is now evidently making us more resilient,” Tan said.

The company’s leasing revenues from Megaworld Premier Offices, its office leasing arm, grew 10% during the first six months to P5.6 billion from P5.1 billion.

Contribution of Megaworld Premier Offices now stands at 78% of the company’s total rental income, which mitigated the impact of partial operations of Megaworld Lifestyle Malls due to the pandemic, the property developer said.

This year, the company is set to complete construction of five new office developments in its various townships, particularly in Iloilo Business Park in Iloilo City, Arcovia City in Pasig City, Westside City in Parañaque City, McKinley West and Uptown Bonifacio in Taguig City, adding around 213,000 square meters of completed projects in the company’s leasable office portfolio.

To date, these projects are already 90% pre-leased on the average, according to Megaworld.

“Business process outsourcing (BPO) companies and traditional offices such as corporate headquarters of multinational companies still occupy around 90% of our spaces, which still continued their operations even at the height of the lockdown,” Tan said.

“We are closing some deals from many Metro Manila- based BPO companies that require an immediate expansion in our provincial townships due to eased quarantine rules there. Our current portfolio of active BPO tenant partners is still huge, and these are our first-line takers in our provincial developments,” he said.

Megaworld is expecting to end the year with 70 completed office developments covering 1.4 million square meters of leasable office inventory, excluding those that have already been sold.

Megaworld’s rental income for the first half declined by 11% toP7.2 billion, while hotel revenues were down 29% to P917.9 million from P1.3 billion.

Megaworld Hotels, which currently operates 10 hotel properties with around 3,500 rooms under its homegrown brands of Richmonde, Belmont, Savoy, Hotel Lucky Chinatown, and Twin Lakes Hotels, continued serving pre-booked guests from BPO companies as well as “balikbayans” during the lockdown.

Even as the lockdown limited selling activities for residential projects, Megaworld said its reservation sales during the first half of the year reached P38 billion, which peaked during the second quarter when most parts of the country was placed under enhanced community quarantine.

Real estate sales reached P14.3 billion, down 29% decline from P20.2 billion during the same period last year, as the company implemented “more flexibility” in payment terms during the quarantine period.

To date, Megaworld has 26 masterplanned integrated urban townships, integrated lifestyle communities, and lifestyle estates across the country. -NB, GMA News