As partial fulfillment of the

ACC08-Financial Management part 1

This GA # 2
MEGAWORLD
Is presented to the faculty of Financial Management

And submitted to
Ms. Jackqui R. Moreno
Faculty-in-charge

By
Andaya, Roneal Clarisa T.
Bantug, Rea Kaila Audrich R.
Ballesteros, Pamela Vivien T.
Garcia, Adren Kaye A.
Turla, Jayvee N.
3CAC SY 2015-2016

Introduction

Among the players in the industry, the group ended up choosing Vista Land and Shang Properties as its closest
competitors. Aside from the fact that these three are included in the top 10 real estate developers in the Philippines
according to various independent online rankings, these companies annual earnings are not far from each other.
Megaworld Corporation is the country's leading real estate developer and No. 1 business process and outsourcing
(BPO) office developer and landlord in the Philippines. Led by real estate magnate and visionary, Dr. Andrew L.
Tan, Megaworld pioneered LIVE-WORK-PLAY-LEARN integrated urban townships in the country.
To date, the company has introduced 18 successful large-scale, master-planned mixed-use townships across the
country. Eastwood City in Quezon City (18.5 hectares), which holds the distinction of being the country's first
cyberpark; Newport City in Pasay City (25 hectares), which is the home of Resorts World Manila; McKinley Hill
(50 hectares), McKinley West (34.5 hectares), Uptown Bonifacio (15.4 hectares) and Forbes Town Center (5
hectares), all in Fort Bonifacio; The Mactan Newtown in Cebu (28.8 hectares); Iloilo Business Park in Mandurriao,
Iloilo City (72 hectares); Sta. Barbara Heights in Sta. Barbara, Iloilo (173 hectares); Boracay Newcoast in Boracay

Island (150 hectares); Twin Lakes in Tagaytay (1,300 hectares); Woodside City in Pasig City (12.3 hectares);
Southwoods City in the boundaries of Cavite and Laguna (561 hectares); Davao Park District in Lanang, Davao City
(11 hectares); Alabang West in Las Pinas City (62 hectares); and Suntrust Ecotown in Tanza, Cavite (350 hectares);
Northill Gateway (50 hectares) and The Upper East (34 hectares) both in Bacolod City, Negros Occidental.
On the other hand, working through its five particular backups, Vista Land is the main homebuilder in the
Philippines. Vista Land gives an extensive variety of lodging items to its clients over all pay segments. The
Company works through Brittany, Crown Asia, Camella Homes, Communities Philippines, and Vista Residences.
Brittany panders to the top of the line market in Mega Manila, offering extravagance houses in expert arranged
groups, valued at 12.0 million or more. Crown Asia indulges the center wage lodging fragment in Mega-Manila,
fundamentally offering houses estimated between 4.0 million and 12.0 million. Camella Homes has overhauled
the minimal effort and moderate lodging fragment, estimated between 0.8 million and 4.0 million, in the Mega
Manila range. Groups Philippines and its backups offer private properties outside the Mega Manila zone in the
minimal effort and reasonable and center salary lodging fragments. Vista Residences offers vertical private ventures
in the Mega Manila area.
The speculations of the Kuok Group in the Philippines incorporate all the Shangri-La inns and resorts in the nation
and Shang Properties, Inc. ("SPI"), which is the nearby property improvement arm of the gathering with center
organizations in upscale office and retail renting and private advancement. SPI has a 100% stake in the Shangri-La
Plaza Corporation, which possesses and works the upscale Shangri-La Plaza in Mandaluyong City. The organization
extended its business portfolio in 2002 by entering the private townhouse market with its first venture, the, 46-story
Shang Grand Tower. Shang Properties, Inc., is the product of the merger of Edsa Properties Holdings, Inc. (EPHI)
and Kuok Philippine Properties, Inc. (KPPI). The consolidation of ownership and management of EPHI and KPPI
was completed in 2007. Under the terms of the merger, EPHI was the surviving entity and assumed all the
obligations and undertakings of KPPI, the absorbed entity. The merger resulted in increased financial strength
through pooling of resources, increased operating economies and reduction of expenses; created a wider shareholder
base and delivered higher share prices; and allowed EPHI to broaden its product offering as now had a free hand in
utilizing KPPIs prime properties. The combined entity is what is now known as Shang Properties, Inc.

Results and Analysis

Megaworld Financial Ratios
2014

2013

2012

Current Ratio

3.14

17.36842105

3.8

19.87381703

3.17

Quick Ratio *

0.65

47.15447154

1.23

25.51020408

0.98

Liquidity Analysis
Ratios:

Cash Ratio

0.65

47.58064516

1.24

18.0952381

1.05

Times Interest Earned

14.59

101.2413793

7.25

-43.84198296

12.91

Debt-to-Equity Ratio

0.26

7.142857143

0.28

12

0.25

Debt-to-Total Asset Ratio

41.73

0.870195794

41.37

-3.991645393

43.09

44.33

3.069053708

43.01

6.93684734

40.22

40.57

62.73565985

24.93

2.931461602

24.22

Return on Assets

10.92

91.24343257

5.71

10.01926782

5.19

Return on Equity

20.93

90.44585987

10.99

20.50438596

9.12

Dividend Payout Ratio

12

-40

20

60

12.5

Earnings/Share(Basic)

0.67

123.3333333

0.3

6.761565836

0.281

Basic Earning Power

260.44

107.4062276

125.57

9.620253165

114.55

Dividend Yield

0.59

22.91666667

0.48

-78.18181818

2.2

Price/ Earnings Ratio

(Basic-diluted)

6.99

33.55513308

10.52

6.693711968

9.86

168.75

4.833198733

160.97

-33.30432981

241.35

1.14

2.564102564

1.17

1.17

221.67

7.169793077

206.84

-28.06566043

287.54

Inventory Turnover

3.87

20.9375

3.2

14.6953405

2.79

Fixed Assets Turnover

27.74

41.51380983

47.43

30.73318633

36.28

Total Asset Turnover

0.18

5.263157895

0.19

26.66666667

0.15

Debt Utilization Ratios:

Profitability Ratios:
Gross Profit Margin
Operating Profit Margin

Payables Period
Asset Utilization Ratios:
Receivables Turnover
Average Collection Period

Having its current assets at Php98.46 billion as against its current obligations of Php25.90 billion in 2013,
Megaworld's quick ratio increased by 135.62% in 2013. Current assets posted an increase of 20.46% from
December 31, 2012 balance of Php81.73 billion while current obligations reflected a increase of only 0.52% from
December 31, 2012 balance of Php25.76 billion. This change in cureent assets is mainly due to proceeds from
issuance of new common stocks; dollar bonds; exercise of stock warrants and sale of an associate. However, the
quick ratio went down by almost 20% at the end of 2014 because of the 20.81% decrease in the company's cash and
cash equivalents due to capital expenditure and operating activities for business expansion. The cash ratio of
Megaworld from 2013 to 2014 also had a significant change of -47.48% caused by the decrease in cash and cash
equivalents for the same reason stated earlier.
In terms of profitability, on the other hand, MEG's operating margin escalated by 60.75% in 2014. This was caused
by 52.25% increase in real estate sales representing a portion of gross profit from sales in prior years realized in the
current year. Another contributor to this is the 20.88% increase in rental income which was due to the escalation and
completion of additional leasing property and increase in demand for office space from BPO Companies. The return
on assets and return on equity ratios also had a large change in the recent year amounting to anincrease of 87.5% and
88.94% respectively. It has been found that the reason for these changes is not only the increase in real estate sales
and rental income but the 330.93% boost in MEG's interest and other income. This is mainly due to non-recurring
gains from the acquisition and sale of subsidiary and associate. This event caused Megaworld's net income for 2014
to boost, making ROA, and ROE increase accordingly.
Although there was a major increase in company's ROE and ROA in 2014, the largest contributor to their net
income for the year are non-recurring gains. In evaluating MEG's performance, there is only a temporary inflation of
the company's reported profit. The main basis that was chosen for accurate performance evaluation is the operating
profit margin. Putting non-recurring gains aside, the company still projected a good operating profit margin through
the significant increase of 60.75% in 2014 in comparison to the 3% increase it had in from 2012-2013. It shows that
compared to the prior years, MEG can now make enough money from operations to support the business and does
not need to depend on non-operation income to cover operation expenses. Therefore, Megaworld's performance may
be considered improving.

Vista Land Financial Ratios

2014

2013

2012

Current Ratio

3.08

-20.6185567

3.88

109.7297297

1.85

Quick Ratio *

1.84

-19.29824561

2.28

132.6530612

0.98

Cash Ratio

0.17

6.25

0.16

77.77777778

0.09

Times Interest Earned

14.95

4.399441341

14.32

-2.717391304

14.72

0.64

39.13043478

0.46

475

0.08

Liquidity Analysis
Ratios:

Debt Utilization
Ratios:
Debt-to-Equity Ratio

Debt-to-Total Asset
Ratio

50.31

18.12632073

42.59

3.123486683

41.3

Gross Profit Margin

50.68

-0.078864353

50.72

-0.490484599

50.97

Operating Profit Margin

26.6

3.582554517

25.68

-0.580720093

25.83

Return on Assets

5.97

-6.279434851

6.37

3.241491086

6.17

Return on Equity

11.24

2.274795268

10.99

5.876685934

10.38

Dividend Payout Ratio

0.16

-5.882352941

0.17

-5.555555556

0.18

Earnings/Share(Basic)

66.9

12.81618887

59.3

14.47876448

51.8

Basic Earning Power

65.74

15.13134851

57.1

-2.924175451

58.82

-1.960784314

2.04

-7.272727273

2.2

18.6

18.6

24

15

217.41

-4.5274899

227.72

-14.62847717

266.74

1.14

-2.564102564

1.17

1.17

Average Collection
Period

320.73

2.404214559

313.2

0.252872827

312.41

Inventory Turnover

0.66

1.538461538

0.65

20.37037037

0.54

-52.15311005

2.09

7.731958763

1.94

0.23

-8

0.25

8.695652174

0.23

Profitability Ratios:

Dividend Yield
Price/ Earnings Ratio
(Basic-diluted)
Payables Period
Asset Utilization
Ratios:
Receivables Turnover

Fixed Assets Turnover

Total Asset Turnover

.
Vista Lands Current ratio as of December 31, 2014 decreased from December 31, 2013 due primarily to the
increase in current portion of the notes and bank loans, specifically from the Companys recorded revenue from real
estate sales amounting to P=22,235.4 million for the year ended December 31, 2014 an increase of 11% from
P=20,024.6 million in same period last year. This was primarily attributable to the increase in the overall completion
rate of sold inventories of its business units particularly of Communities Philippines, Vista Residences and Crown
Asia. The Notes payable that increased by 112% from 13,554.3 million as of December 31, 2013 to 28,742.7 million
as of December 31, 2014 due primarily to the issuance of dollar notes and peso retail bond for the year. Another
effect of this is the Debt-to-equity ratio that increased due to the increase in the total liabilities brought by the
issuance of dollar notes and peso retail bond for the year. Interest expense as a percentage of income before interest

expense decreased in the year ended December 31, 2014 compared to the ratio for the year ended December 31,
2013 due to the higher capitalized interest for the year.
.
The ratio is which is obtained by dividing the Companys net income by its total assets is Return on Asset, this
measures the Companys earnings in relation to all of the resources it had at its disposal. Return on asset decreased
for December 31, 2014 compared to that on December 31, 2013 due primarily to the increase in total assets resulting
from the increase in total cash and cash investments for the period. The Return on Equity ratio is obtained by
dividing the Companys net income by its total equity. This measures the rate of return on the ownership interest of
the Companys stockholders, the Return on equity increased due primarily to the higher net income reported for the
year ended December 31, 2014.
.
Vista Lands reputation as the countrys trusted homebuilder has been growing steadily since the 1970s, it started
when Camella Homes was established. In the short years since its public offering, Vista Land has accomplished so
many things that could make the company retain its strong standing in the Philippine business landscape or in the
property industry.

Shang Financial Ratios

2014

2013

2012

Current Ratio

2.37

13.39712919

2.09

2.09

Quick Ratio *

1.15

-15.44117647

1.36

52.80898876

0.89

Cash Ratio

0.47

-2.083333333

0.48

-2.040816327

0.49

Times Interest Earned

18.4

10.44417767

16.66

53.974122

10.82

Debt-to-Equity Ratio

0.49

145

0.2

11.11111111

0.18

Debt-to-Total Asset Ratio

49.19

34.7302109

36.51

2.671541057

35.56

62.13

17.78199052

52.75

2.169281426

51.63

63.8

32.22797927

48.25

-8.73841498

52.87

Return on Assets

5.84

8.955223881

5.36

14.52991453

4.68

Return on Equity

12.01

25.36534447

9.58

14.18355185

8.39

Dividend Payout Ratio

31.1

31.22362869

23.7

-21.52317881

30.2

Liquidity Analysis
Ratios:

Debt Utilization Ratios:

Profitability Ratios:
Gross Profit Margin
Operating Profit Margin

Earnings/Share(Basic)

0.57

35.71428571

0.42

20

0.35

Basic Earning Power

41.35

34.55906281

30.73

72.15686275

17.85

Dividend Yield

4.09

21.72619048

3.36

24.44444444

2.7

Price/ Earnings Ratio

(Basic-diluted)

7.4

-22.10526316

9.5

-17.39130435

11.5

562.96

109.5358618

268.67

-15.43279824

317.7

1.68

-35.13513514

2.59

-20.79510703

3.27

Average Collection
Period

217.79

54.450039

141.01

26.23992838

111.7

Inventory Turnover

0.59

-51.63934426

1.22

408.3333333

0.24

Fixed Assets Turnover

96.19

5.160161802

91.47

31.38465958

69.62

Total Asset Turnover

0.14

-17.64705882

0.17

30.76923077

0.13

Payables Period
Asset Utilization Ratios:
Receivables Turnover

Shang Corporations current ratio as of December 31, 2014 increased from December 31, 2013 which was 2.37:1
and 2.09:1, respectively. It was because of the turnover comprising of Rental Revenue, Condominium Sales, Interest
Income and Other Income. For the first quarter finished March 31, 2012, the Group's solidified incomes added up to
P857.5M, higher by P200.8M or 30.6% from P656.7M of aggregate incomes posted in the same period a year ago.
The townhouse deals posted an expansion of P205.3M predominantly because of higher deals bookings from One
Shangri-La Place.
The total assets of the company amounted to P54.6B, an increase of P15.6B from P39B in December 31, 2013 due
to increase in cash and cash equivalents by P1.1B. The financial assets at fair value increased by P3M due to the fair
value adjustments recognized during the period. The prepayments and other current assets increased by P1.3B
mainly due to the release of cash in escrow in payment of Development Rights of Shang Salcedo. The deferred
income tax assets decreased by P15M mainly due to the NOLCO and MCIT recognized by the Parent Company
during the period.
The total liabilities increased by P12.6B from P14.2B in 2013 to P26.8B in 2014 due to the increase in accounts
payable and other current liabilities by P2.2B mainly due to payables for construction of new projects. The income
tax payable increased by P78.2M due to taxable income generated during the quarter. The decrease in accrued
employee benefits by P9.2M due to the payments made during the period. The increase in deposit from tenants by
P27.8M represents the deposits due to renewal.
There are no known trends, events or uncertainties that have had or that are reasonably expected to have material
favorable or unfavorable impact on net sales or revenues or income from continuing operations. There are no
significant elements of income or loss that did not arise from the registrants continuing operations.
The Kuok Group entered the Philippines through partnership with the Ayalas in Makati. In 2002, the company its
first residential condominium project the 46-storey Shang Grand Tower. With the success Shang Grand Tower, it
built the second residential project, the twin tower 60-storey St. Francis Shangri-La Place. In 2007, the group merged

Edsa Property Holdings and Kuok Philippine Properties into Shang Properties, Inc. In 2008, it acquired shares of
San Miguel Properties Inc. (SMPI) in KSA Realty Corporation, owner of The Enterprise Center at Makati CBD,
effectively allowing Shang Properties control of the office tower.

Ratio Comparison
MEG

VLL

SHNG

INDUSTRY
AVERAGE

3.14

3.08

2.37

2.8633

221.67

320.73

217.79

253.4

.18

.23

.14

.1833

Return on Sales

40.57

26.60

63.8

43.658

Return on Assets

10.92

5.97

5.84

7.1867

Return on Equity

20.93

11.24

12.01

13.33

Times Interest Earned

14.59

14.95

18.4

14.13

Price/Earnings Ratio

6.99

18.6

7.4

11

Current Ratio
Average Collection Period
Total Asset Turnover

Results and Analysis.

CURRENT RATIO
It is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12
months. Similarities are visible among the three companies. It shows that they can pay for their liabilities more than
2 times of its worth with the use of their current assets.
AVERAGE COLLECTION PERIOD

MEGAWORLD

The Group evaluates these accounts based on available facts and circumstances affecting the collectability
of the accounts, including, but not limited to, the length of the Groups relationship with the customers, the
customers current credit status based on third party credit reports and known market forces, average age of
accounts, collection experience and historical loss experience. The methodology and assumptions used in

estimating future cash flows are reviewed regularly by the Group to reduce any differences between loss
estimates and actual loss experience. They also make available bank financing facilities to buyer on easy
terms thru partner banks to ensure payment.

SHANG PROPERTIES

The group assesses whether it is probable that the economic benefits will flow to the group when the
contract price is collectible. Collectability of the contract price is demonstrated by the buyer's commitment
to pay, which is supported by the buyer's initial and continuous investments that motivates the buyer to
honor its obligation. Collectability is also assessed by considering factors such as collections and credit
standing of the buyer.

VISTA LAND
The Company transacts only with recognized and creditworthy third parties. The Groups receivables are
monitored on an ongoing basis resulting to manageable exposure to bad debts. Real estate buyers are
subject to standard credit check procedures, which are calibrated based on the payment scheme offered.
The Groups respective credit management units conduct a comprehensive credit investigation and
evaluation of each buyer to establish creditworthiness.
To mitigate risk, the Company has a structured and standardized credit approval process, which includes
conducting background and credit checks on prospective buyers using national credit databases and, where
feasible, conducting physical verification of claims regarding residences and properties owned. From time
to time, the Company utilizes its receivables rediscounting lines with banks and other financial institutions
and sells instalment contract receivables. The Company ensures that all buyers are made aware of their
responsibilities and obligations, and the resulting penalties for non-compliance. Each and every account is
monitored to assist buyers and to provide immediate remedial measures in problem cases

Due to the nature of the business the three companies allow customers to purchase via credit, but one of the
problems with extending credit is not knowing when the customer will make cash payments. Shangrila having the
shortest collection period means that theres a better management of receivables for prompt collection and Vistaland
having a strict compliance of choosing credit worthy parties still encounter longer collection period that may
negatively affect the short-term debt paying ability of its business in the eyes of future creditors and analysts.

TOTAL ASSET TURNOVER

The total asset turnover ratio measures the ability of a company to use its assets to efficiently generate sales. This
ratio considers all assets, current and fixed. Those assets include fixed assets, like plant and equipment, as well as
inventory, accounts receivable, as well as any other current assets. No major significant difference is seen among the
three competing companies in this ratio it only shows that all of the companies are generating their assets almost the
same as how the others are using it.

RETURN ON SALES / OPERATING PROFIT MARGIN

A high return on sales or increase in return on sale indicates that the company is growing more efficient and able to
sell its products well and its profits are likely sustainable; a low return on sales indicates looming financial troubles.
Among the three the most efficient in making their money grow more profit and show great operating performance
is Shangrila Properties because theyve been able to maximize the use of their revenue to attend to their nonoperating costs like interest expense. High profit margin shows that Shangrila is running its operations smoothly and
this income supports the company.

RETURN ON ASSETS
An indicator of how profitable a company is relative to its total assets. It gives an idea as to how efficient
management is at using its assets to generate earnings. The assets of the company are comprised of both debt and
equity. Both of these types of financing are used to fund the operations of the company. The higher the value, the
better; because the company is earning more money on less investment.
Among the three the company that effectively converting money it has to invest into net income is Megaworld.
Their objective is to minimize cash outlays for projects, control development costs, maintain a net cash position and
maximize cost efficiencies and resources and by doing that they use preselling as a project financing tool. They
enter into joint development agreements for the acquisition of land. They also make sure that they establish linkages
with a broad base of suppliers and efficient project management and monitoring for ontime completion of projects
and efficient sourcing of construction materials.

RETURN ON EQUITY
It is a measure of profitability of stockholders' investments. It shows net income as percentage of shareholder equity.
According to the table above, the company that generates the most the money that shareholders invested is
Megaworld. This may entirely result from the objectives that they strictly follow in maintaining cost efficiency and
minimizing cash outlay that they were able to distribute dividends to their shareholders higher than the competing
companies.

TIMES INTEREST EARNED

A solvency ratio measuring the ability of a business to pay off its debts. It is calculated by taking a company's
earnings before interest and taxes (EBIT) and dividing it by the total interest payable on bonds and other contractual
debt.
Among the three companies creditors will favor Shang Properties because it shows that the company can afford to
pay its interest payments when they come due. Because creditors want to ensure interest payments to debt holders
and preventing bankruptcy depends mainly on a company's ability to sustain earnings. Higher ratio may seem to be
less risky than lower ratio but it also indicate that a company has an undesirable lack of debt or is paying down too
much debt with earnings that could be used for other projects. The rationale is that a company would yield greater
returns by investing its earnings into other projects and borrowing at a lower cost of capital than what it is currently
paying to meet its debt obligations.

10

PRICE EARNINGS RATIO

If there is one number that people look at than more any other it is the Price to Earnings Ratio. It is one of those
numbers that investors throw around with great authority as if it told the whole story. In general, a low P/E is
considered a sign that a stock may be undervalued, or that investors expect poor future earnings. By contrast, a high
P/E is thought to indicate an over-valued stock, or one that is expected to post significant earnings increases
From the table, it revealed that Vista Land has the highest price earnings ratio that gives us an idea of what the
market is willing to pay for the companys earnings. Just for the certainty of their investments, the market is willing
to pay more because they truly believe that Vista Land is performing well.
Some of the safety measures that Vista Land is making sure of when it comes to securing their place in the business
world is that they follow specific procedures to identify land that is suitable for its needs and performs market
research to determine demand for housing in the markets it wishes to enter.
The Company also conducts its own appraisal process of the asking price of the property under consideration by
reference to comparison with other similar properties in the market; and an assessment of the potential income
derivable from any development suitable for the property and the calculated value of the land given the potential
income. Before directly acquiring land or entering into a joint venture arrangement with a land owner, the Company
conducts engineering and environmental assessments in order to determine if the land is suitable for construction.
The important thing to remember when looking at P/E ratios as part of your stock analysis is to consider what
premium you are paying for a company's earnings today, and determine if the expected growth warrants the
premium. Also compare it to its industry peers to see its relative valuation to determine whether the premium is the
worth the cost of the investment.

RETURN ON SALES RANKING

1.

SHANG 63.8

2.

MEGA 40.57

3.

VISTA 26.6

RETURN ON ASSETS RANKING

1.

MEGA 10.92

2.

VISTA 5.97

3.

SHANG 5.84

RETURN ON EQUITY RANKING

11

1.

MEGA 20.93

2.

SHANG 12.01

3. VISTA 11.24

12