Megawide Construction Corporation TUE 22 AUG 2017

3Q17 profits up 41.3% y/y, in line with

guidance but outperforms consensus
3Q17 profits reach Php456 Mil, up by 41.3% y/y. MWIDEs profits reached Php487.0 Mil in the
third quarter of 2017 as it booked a 30.2% y/y growth in its revenues to Php4.8 Bil. This brought
9M17 profits to Php1.4 Bil, up 5.7% and reversing the 5.9% decline registered in 1H17. Profits
N/A
were in line with managements guidance (78.6% of full-year net income guidance) but ahead of
consensus forecast (85.9% of full-year estimate). TICKER: MWIDE
FAIR VALUE: N/A
Revenues for the first nine months of 2017 grew by only 3.9% y/y to Php14.3 Bil. This is in
CURRENT PRICE: 18.04
line with managements guidance (76.4% of full-year guidance) and consensus estimates (74.8%
of full-year estimate). Still, the growing share of MWIDEs airport revenues (12.8% this 9M17 UPSIDE: N/A
compared to last years 10.0%) allowed gross profit margin (GPM) and operating profit margin
(OPM) to increase by 200 bps and 160 bps y/y to 23.9% and 18.1%, respectively. This in turn
allowed net income for the nine month period to increase at a faster pace of 5.7%. SHARE PRICE MOVEMENT

Order book declines by 9.0% q/q to Php30.6 Bil. MWIDEs order book declined by 9.0% q/q to 110

Php30.6 Bil as it failed to offset its revenue booking with new contracts. Still, MWIDE is hopeful
that it can grow its order book given the numerous big-ticket projects that it is currently bidding
for. The current order book mix is 69% residential projects, 24% office & commercial projects, 100
and 7% infrastructure projects.

MWIDE continues bid for projects. MWIDE is continuing its plans to bid for an engineering,
90
procurement, and construction (EPC) contract for Clark International Airport that has a total
contract value of Php12.55 Bil. The target bid date for this project is on December 2017, with
an estimated construction period from December 2017 to 2020. Last June 2017, MWIDE also
submitted an unsolicited proposal for the rehabilitation, construction, and development of 80
several sections in Mactan Cebu International Airport (MCIA). While the project could undergo a 28-Aug-17 28-Sep-17 28-Oct-17 28-Nov-17
Swiss challenge, MWIDE expects to be given the original proponent status by the end of the year, MWIDE PSEi
giving it the right to match the offer of the highest bidder. The estimated investment needed for
this project is Php208 Bil and will have a 50-year concession period and a 12-year construction
period. ABSOLUTE PERFORMANCE

Valuation. Consensus fair value estimate of MWIDE is Php19.23/sh. At its current price of 1M 3M YTD
Php18.44/sh, MWIDE is trading at 23.3X 2018E P/E. This is a premium to its regional peer median MWIDE 10.00 1.46 21.89
P/E of around 18.0X. PSEi -0.19 3.30 21.04
FORECAST SUMMARY
Year to December 31 (Php Mil) 2013 2014 2015 2016
Revenues 10,880 10,042 15,442 17,658 MARKET DATA
% change y/y 32.6 (7.7) 53.8 14.3
Gross Profit 1,781 1,749 3,225 3,871 Market Cap 38,579.94Mil
% change y/y 27.8 (1.8) 84.4 20.0 Outstanding Shares 2,138.58Mil
Gross Margin (%) 16.4 17.4 20.9 21.9
Operating Income 1,443 1,290 2,334 2,779 52 Wk Range 14.16 - 19.86
% change y/y 29.1 (10.6) 81.0 19.1 3Mo Ave Daily T/O 53.73Mil
Operating Margin (%) 13.3 12.8 15.1 15.7
Net Income 1,396 868 1,274 1,559
% change y/y 37.7 (37.8) 46.8 22.4
Operating Margin (%) 12.8 8.6 8.2 8.8
EPS (in Php) 0.61 0.35 0.41 0.51
% change y/y 26.8 (42.2) 17.4 23.3

RELATIVE VALUE
P/E (X) 29.7 51.3 43.7 35.5 ANDY DELA CRUZ
P/BV (X) 4.8 3.2 3.0 3.2 RESEARCH ANALYST
ROE (%) 21.0 8.1 10.6 13.7
andy.delacruz@colfinancial.com
Dividend Yield (%) 0.0 0.0 0.0 0.0
so urce: M WIDE

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of
the COL Financial website as these may be subject to tampering or unauthorized alterations.
 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

3Q17 profits reach Php456 Mil, up by 41.3% y/y

MWIDEs profits reached Php487.0 Mil in the third quarter of 2017 as it booked a 30.2% y/y
growth in its revenues to Php4.8 Bil. This brought 9M17 profits to Php1.4 Bil, up 5.7% and
reversing the 5.9% decline registered in 1H17. Profits were in line with managements guidance
(78.6% of full-year net income guidance) but ahead of consensus forecast (85.9% of full-year
estimate).

Revenues for the first nine months of 2017 grew by only 3.9% y/y to Php14.3 Bil. This is in line
with managements guidance (76.4% of full-year guidance) and consensus estimates (74.8%
of full-year estimate). Still, the growing share of MWIDEs airport revenues (12.8% this 9M17
compared to last years 10.0%) allowed gross profit margin (GPM) and operating profit margin
(OPM) to increase by 200 bps and 160 bps y/y to 23.9% and 18.1%, respectively. This in turn
allowed net income for the nine month period to increase at a faster pace of 5.7%.

Exhibit 1: Results summary

% % of % of
in Php Mil 3Q16 3Q17 9M16 9M17 % Change
Change Mgt Consensus
Revenues 3,657 4,762 30.2 13,727 14,265 3.9 76.4 74.8
Gross Profit 740 1,084 46.5 3,008 3,405 13.2 - 71.8
Gross Margin (%) 20.2 22.8 - 21.9 23.9 - - -
Operating Income 521 866 66.2 2,265 2,587 14.2 - 73.9
Operating Margin (%) 14.2 18.2 - 16.5 18.1 - - -
Net Income 322 456 41.3 1,308 1,383 5.7 78.6 85.9
Net Margin (%) 8.8 9.6 - 9.5 9.7 - - -
Source: MWIDE, Bloomberg

Revenues up strongly in 3Q17

Revenues in 3Q17 increased by 30.2% y/y, driven by a 30.6% y/y jump in construction revenues
to Php4.1 Bil and a 17.4% y/y growth in airport operation revenues to Php568 Mil. Meanwhile,
the growth in its airport revenue was largely driven by the continued increase in passenger
volumes as well as the several new flight routes and airlines. Average spending per person
also increased owing to more stores, as well as faster check-in times (providing more time for
passengers to roam the airport). For the first nine months of 2017, MWIDEs revenues reached
Php14.3 Bil, in line with managements guidance and consensus forecast.

Management expressed confidence of hitting its full year revenue target of Php18.7 Bil. Aside
from the strong performance of its airport business, the company said its construction order
book backlog stood at Php30.6 Bil as of end-September 2017 and should allow its construction
business to perform well in the fourth quarter of the year.

COL Financial Group, Inc. 2

 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

Exhibit 2: Revenue breakdown % of

Mgt
in Php Mil 3Q16 3Q17 % Change 9M16 9M17 % Change
Guidance
Construction 3,174 4,146 30.6 12,347 12,443 0.8 75.0
Airport operations 483 568 17.4 1,379 1,723 24.9 82.1
Airport merchandising operations - 48 - - 99 - -
Total revenues 3,657 4,762 30.2 13,727 14,265 3.9 76.4
Source: MWIDE

Exhibit 3: Management guidance summary

Construction Airport Consolidated
in PhpMil % y/y % y/y % y/y
16A 17E 16A 17E 16A 17E
change change change
Revenues 15,786 16,580 5.0 1,872 2,100 12.2 17,658 18,680 5.8
EBITDA 2,300 2,420 5.2 1,302 1,500 15.2 3,604 3,920 8.8
EBITDA margin (%) 14.6 14.6 - 69.6 71.4 - 20.4 21.0 -
Net Income 1,017 1,160 14.1 903 1,000 10.8 1,559 1,760* 12.9
Net margin (%) 6.4 7.0 - 48.2 47.6 - 8.8 9.4 -

*excluding net income to minority shareholders

Source: MWIDE

Margin improves on better revenue mix and construction GPM

MWIDEs gross profit margin (GPM) in 9M17 rose by 200 bps to 23.9% as the share of airport
operation revenues (with GPM of 81.8% in 1H17) rose to around 12.1% of total revenues. This
is considerably higher than airport operation revenue share of only 10% last year. Moreover,
MWIDE booked incremental revenues of Php99 Mil from airport merchandising operations.
The said business enjoys higher GPM of around 73.9%. MWIDEs construction GPM in the
period also rose slightly by 20 bps y/y to 15.4%.

Order book declines by 9.0% q/q to Php30.6 Bil. MWIDEs order book declined by 9.0% q/q to
Php30.6 Bil as it failed to offset its revenue booking with new contracts. Still, MWIDE is hopeful
that it can grow its order book given the numerous big-ticket projects that it is currently
bidding for. The current order book mix is 69% residential projects, 24% office & commercial
projects, and 7% infrastructure projects.

Exhibit 4: End-period order book summary

in Php Bil 4Q16 1Q17 % Change 2Q17 % Change 3Q17 % Change

Total backlog 38.49 37.14 (3.5) 33.65 (9.4) 30.62 (9.0)
Source: MWIDE

COL Financial Group, Inc. 3

 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

MWIDE continues bid for projects

MWIDE is continuing its plans to bid for an engineering, procurement, and construction
(EPC) contract for Clark International Airport that has a total contract value of Php12.55 Bil.
The target bid date for this project is on December 2017, with an estimated construction
period from December 2017 to 2020. Last June 2017, MWIDE also submitted an unsolicited
proposal for the rehabilitation, construction, and development of several sections in Mactan
Cebu International Airport (MCIA). While the project could undergo a Swiss challenge, MWIDE
expects to be given the original proponent status by the end of the year, giving it the right
to match the offer of the highest bidder. The estimated investment needed for this project is
Php208 Bil and will have a 50-year concession period and a 12-year construction period.

Valuation

Consensus fair value estimate of MWIDE is Php19.23/sh. At its current price of Php18.44/sh,
MWIDE is trading at 23.3X 2018E P/E. This is a premium to its regional peer median P/E of
around 18.0X.

COL Financial Group, Inc. 4

 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

Megawide Construction INCOME STATEMENT (IN PHPMIL)

Corporation (MWIDE) Revenues

FY14
10,042
FY15
15,442
FY16
17,658
% Growth - 53.8% 14.3%
Gross Profit 1,749 3,225 3,871
COMPANY BACKGROUND
% Growth - 84.4% 20.0%
Megawide Construction Corp. (MWIDE) is EBITDA 1,685 2,864 3,408
engaged in the engineering, procurement, % Growth - 70.0% 19.0%
and construction of buildings, infrastructure, Operating Profit 1,290 2,334 2,779
% Growth 0.0% 81.0% 19.1%
and other structures. It is engaged in the
Net interest expense (325.2) (415.2) (485.6)
construction and the operation of airports
Other Income/Expense 58 24 74
through a 60% stake in GMRMegawide Cebu Pretax Income 1,023 1,944 2,368
Airport Corporation. Aside from this, MWIDE Tax Expense 135 469 448
also has operations in progressive property Net Income to parent 868 1,274 1,559
development through MWM Terminals Inc. % Growth 0.0% 46.8% 22.4%
EPS (Php) 0.35 0.41 0.51
% Growth - 17.4% 23.3%
REVENUE BREAKDOWN
BALANCE SHEET (IN PHPMIL)
FY14 FY15 FY16
10.6% Cash & Equivalents 4,432 3,276 6,265
Trade Receivables 4,736 7,805 4,929
Inventories 322 293 451
10.6%
Other Current Assets 7,638 11,122 9,325
PPE 4,714 4,948 5,267
Other Non-Current Assets 17,665 21,071 24,846
Total Assets 39,507 48,515 51,085
Trade and other payables 2,808 6,664 6,009
ST Debts 14,890 3,592 2,689
89.4%
89.4% Other Current Liabilities 1,313 2,391 2,761
LT Debts 5,025 18,951 23,074
Other Non-Current Liabilities 60 313 343
Construction revenues Airport operation revenues
Construction revenues Total Liabilities
Airport operation revenues 24,097 31,911 34,875
Total Equity 15,411 16,604 16,210
Total Liabilities & Equity 39,507.5 48,514.8 51,084.6
BVPS 6.42 6.92 6.76

CASHFLOW STATEMENT (IN PHPMIL)

FY14 FY15 FY16
Income (loss) before income tax 1,023 1,944 2,368
Depreciation & Amortization 395 530 629
Other Non-Cash Exp (Gains) (26) 10 (44)
Interest income 325 415 486
Increase (decrease) in Working Cap (2,157) 548 2,218
Income tax expense (160) (66) (52)
Operating Cash Flow (600) 3,380 5,605
Capex (710) (565) (699)
Other Investments (14,936) (5,623) (2,311)
Investing Cash Flow (15,646) (6,188) (3,010)
Proceeds (Payment) Debts 12,450 2,901 3,220
Payment of Cash Dividends - (281) (281)
Others 5,952 (969) (2,570)
Financing Cash Flow 18,402 1,651 369
Effect of forex rates on cash & c.e. - - 25
Change in Cash 2,156 (1,156) 2,990

COL Financial Group, Inc. 5

 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

KEY RATIOS
FY14 FY15 FY16
GPM (%) 17.4% 20.9% 21.9%
EBITDA Margin (%) 16.8% 18.5% 19.3%
OPM (%) 12.8% 15.1% 15.7%
NPM (%) 8.6% 8.2% 8.8%
Times Interest Earned (X) 4.0 5.6 5.7
Current Ratio (X) 0.90 1.78 1.83
Net D/E Ratio (X) 1.00 1.16 1.20
Days Receivable 172.1 184.5 101.9
Days Inventory 14.2 8.7 11.9
Days Payable 123.6 199.1 159.1
Asset T/O (%) 25.4% 31.8% 34.6%
ROAE (%) 8.1% 10.6% 13.7%

MAJOR CORPORATE DEVELOPMENTS (5-YEARS)

MWIDE disclosed its planned placement of 150 Mil common shares at Php14.90/sh 10/28/2016

MWIDE entered into a JV with GMR for a 60% stake in GMR Megawide Cebu
4Q14
Airport Corp.

COL Financial Group, Inc. 6

 EARNINGS ANALYSIS I MWIDE: 3Q17 PROFITS UP 41.3% Y/Y, IN LINE WITH GUIDANCE BUT OUTPERFORMS CONSENSUS

TUE 28 NOV 2017

IMPORTANT RATING DEFINITIONS

BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the next six to
12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might be poor
or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the next six to twelve
months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

IMPORTANT DISCLAIMER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may be
incomplete or condensed. All opinions and estimates constitute the judgment of COLs Equity Research Department as of the date of the report and are subject to change
without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. COL Financial and/
or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies mentioned in this report and may trade
them in ways different from those discussed in this report.

COL RESEARCH TEAM

APRIL LYNN TAN, CFA

VP & HEAD OF RESEARCH
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAEDA, CFA

DEPUTY HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

FRANCES ROLFA NICOLAS ANDY DELA CRUZ JUSTIN RICHMOND CHENG

RESEARCH ANALYST RESEARCH ANALYST RESEARCH ANALYST
rolfa.nicolas@colfinancial.com andy.delacruz@colfinancial.com justin.cheng@colfinancial.com

KYLE JEMMRIC VELASCO JOHN MARTIN LUCIANO

RESEARCH ANALYST RESEARCH ANALYST
kyle.velasco@colfinancial.com john.luciano@colfinancial.com

COL FINANCIAL GROUP, INC.

2402-D EAST TOWER, PHILIPPINE STOCK EXCHANGE CENTRE,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
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WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 7