Megawide's commercial leasing struggles in Q2 despite profitable construction projects

Megawide's [MWIDE 6.11 1.13%] Q2/21 net loss of P96 million, up 80% from Q2/20 net loss of P49 million, and down 3460% from Q1/21 profit of P3 million. The infrastructure firm said that it was able to trim its net loss thanks to a profitable quarter for its construction segment, which reported a 1H 43% increase y/y in revenues and contributed over 91% to MWIDE’s consolidated revenues for the first half of the year.

MWIDE said that its success was due to the gradual ramp-up of construction activities on projects for Suntrust [SUN 1.58], Megaworld [MEG 2.85 1.42%], and the DOTr’s Malolos Clark Railway Phase 1 Project. MWIDE’s airport and landport operations continue to struggle mightily, with the airport segment still operating at just 10% of normal passenger volumes. MWIDE reported that both international and domestic passenger volumes were still down, but is “optimistic” for a turnaround “once the global vaccination program has been effectively rolled out”.

The landport business (commercial leasing, mostly to POGO clients) also continued to struggle; revenues were down 40% due to the “indefinite disruption” of POGO operations. Based on what it knows now, MWIDE does not anticipate having any cash flow or liquidity problems.

MB BOTTOM-LINE

MWIDE’s stock performance has been just brutal. It’s pre-COVID range of P14/share is just a distant memory for long-term investors, with shares currently trading barely above its COVID-crash low of P4.75/share. The stock had a brief period in the sun back in November of last year when it looked like MWIDE could be picked to helm the NAIA Project; its stock climbed from P7.50 to P10.50 in just a couple of weeks’ time, only to crash back to earth (P8/share) less than a month later as the war of words between MWIDE and its vague cloud of detractors eventually culminated in MWIDE losing its preferred status on the bid due to financial capacity issues.

Since then, the stock has ranged lower, shedding 25% of its value since the beginning of the year. Anyone looking to “bodega” this stock for the promise of that sweet sweet travel rebound needs to take a pretty close look at how the delta variant is throwing a massive wrench into the fragile (and basically non-existent) international travel recovery this year. Some are pushing the eventual recovery out even further than 2023 we were talking about last year, with some groups talking about 2024 and others pointing to 2025 as the year when international air travel (and in particular, air travel in Asia) will reach pre-pandemic levels.

As we’ve seen with the delta variant, it’s hard to bet that this eventual recovery will be a smooth, orderly process. Unless something changes dramatically, it looks like MWIDE’s just going to be treading water.  

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