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I. Historical Account of the Firm

Megawide is one of the country’s most progressive infrastructure conglomerates

with a decisive portfolio in Engineering, Procurement, and Construction (EPC), Airport

Infrastructure, Progressive Property Development, and Renewable Energy. Its

revolutionary construction and engineering solutions continue to shape the industry by

integrating its comprehensive EPC capabilities with innovative construction support

technologies such as precast, formwork systems, and concrete batching.

Megawide is a strong partner of the Philippine government through the Public-

Private Partnership (PPP) program, with projects such as the Mactan Cebu International

Airport, the Southwest Integrated Transport System, and the PPP for School

Infrastructure Project Phases 1 and 2.

A. History of the Firm

Megawide has come a long way from our

inception almost 20 years ago. From a pure

construction firm, the Corporation have transformed

into one of the country’s most forward-looking

conglomerates with a solid portfolio in the areas of

Engineering Procurement Construction (EPC), airport

infrastructure, and progressive property development.


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1997-2007

Megawide began in 1997 as a construction firm. Within 10 years, we

oversaw our first mid-rise residential project, obtained a Triple-A PCAB License,

and won our first high-rise project with the SM Development Corporation.

2011

The year marked a significant growth in the company with their Initial

Public Offering, the construction of our precast plant in Taytay, Rizal, and the

launch of our five-year strategic diversification plan.

2012-2013

As we grew, we strengthened our commitment to nation-building and the

local communities through PSIP Phases 1 and 2, awarded in 2012 and 2013,

respectively. With the vision to transform the quality of public school structures in

the country, we built over 7,000 classrooms in Regions 3 and 4A for Phase 1,

and 2,440 classrooms in Regions 1, 2 , 3, and CAR for Phase 2. Megawide

Foundation was also established in 2012.

2014
The Corporation won the Mactan-Cebu International Airport (MCIA)

project, giving the firm diversification efforts a stronger foothold. In the same

year, the firm obtained ISO 9001:2008 and ISO 14001:2004 certifications, as well

as the OHSAS 18001:2007 certification for implementing practices that create a

healthy and safe working environment. The firm have also began to penetrate the

upper market housing segment with the Proscenium project of Rockwell and

Shang Salcedo of Shang Properties. Moreover, the business also won contracts
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for different residential and commercial markets with property developers such as

8990 Holdings, Inc., Greenway Properties Realty Corp., Arthaland Corporation,

and Megaworld Corporation.

2015

The corporation expanded their portfolio in the mass housing sector with

8990’s Deca Homes, and increased the client portfolio with Double Dragon’s

flagship development. The firm have also ventured further into more private

sector and government infrastructure projects with the Southwest Intermodal

Transport Exchange (SWITEX) project. For achieving safe man-hours in project

sites, the Safety Organization of the Philippines and the Occupational Safety and

Health Center presented the business with five Awards of Merit and an Award of

Excellence.

2016 2016

As the corporation continue to advance with infrastructure development,

EPC revenues increased by 13%, fuelled by growth in private sector projects.

The continued performance of the business segments were reflected in the

strong appreciation of the share price, resulting in our highest market

capitalization since our stock market debut in 2011.

B. Vision and Mission Statement

Mission

To improve communities through Engineering Excellence by continuously

delivering the highest quality service to our partners.


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Vision

To become the Philippines’ leading and largest construction

conglomerate.

C. Core Values

COMMITMENT TEAMWORK

INNOVATION SAFETY
EXCELLENCE

Ex.C.I.Te.S. is the acronym of the corporate values of Megawide

Construction Corporation. It is the continued drive and goal of the company to

institutionalize these values and infuse them into its culture.

II. Performance of the Firm

a. Level of Resources

Human Resource

As of December 31, 2017, Megawide’s manpower complement is as follows:

Division Regular Project Based Total


Operations 52 1,208 1,260
Head Office 167 79 246
Total 219 1,287 1,506

Manpower is any business most important resources. Every year, Megawide

hires qualified and competent employees to sustain the manpower needed in their

projects. Megawide is not unionized. The relationship and cooperation between the
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management and staff has been good and is expected to remain so in the future. There

has not been any incidence of work stoppages or labour disputes in the past. There is

no existing collective bargaining agreement between Megawide and its employees.

Megawide complies with the minimum wage and employment benefits standards

pursuant to Philippine law. It adopts an incentive system that rewards and recognizes

the employees who excel in their respective fields to foster the harmonious relationship

between management and the employees.

Land

Megawide owns a 1.0294-hectare property located at Taytay, Rizal which is

being used as an equipment stockyard for such items as tower cranes, backhoes and

other earthmoving equipment. The same was acquired by Megawide for P21 Million.

Megawide owns this property and all its construction equipment such as tower cranes

and other earthmoving equipment, free of any mortgage, lien or encumbrance. There

are no limitations on Megawide’s ownership or usage over this property

In 2011, Megawide acquired land in Ortigas Extension, Barangay San Isidro,

Taytay, Rizal with lot area of 21,082 square meters for P104 Million. Megawide owns

this property free of 31 any mortgage, lien or encumbrance. There are no limitations on

Megawide’s ownership or usage over this property.

In 2012, another lot was purchased in Taytay, adjacent to Megawide’s precast

plant with lot area of 8,505 square meters for P50 Million. A 4,022 square meter lot

adjacent to the stockyard of Megawide in Taytay was purchased for P9 Million. On the

same year, Megawide bought a 178 square meter property located in the same

municipality for a total amount of P1.157 Million. Megawide owns these properties free
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of any mortgage, lien or encumbrance. There are no limitations on Megawide’s

ownership or usage over this property

In 2013, Megawide has a total additional land acquisition amounting to P67

Million in Taytay Rizal in relation to the Precast Plant expansion. The property is free of

any attachments and limitations on ownership and usage. In 2014 and 2015,

Megawide invested on new tower cranes, earthmoving equipment and

other construction equipment to ensure maximum efficiency and minimum down time

during construction. Total investment amounted to P485 million and P369 million in

2015 and 2014, respectively. Megawide also acquired additional lot adjacent to the

precast plant in 2014 with area of 23,686 forP148 million and lot area of 16,017

sqm.near the precast plant forP17 million in 2015.

In 2017 and 2016, to cater its growing order book Megawide also invested on

new construction equipment amounting to P275 and P470 million, respectively which

includes tower cranes, earthmoving equipment, formworks and precast equipment

Transportation equipment were also procured amounting to P54 million and P57 million

in 2017 and 2016, respectively which includes service vehicles, truck mixers, light and

medium duty trucks and tractor trucks

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Megawide also purchased parcels of land adjacent to its Taytay complex

amounting to P82 million and P156M in 2017 and 2016, respectively. Taytay complex

is currently expanding to house the formworks rehabilitation factory and all the

construction equipment of the Megawide. The new parcels of land will also provide a

bigger stockyard for the precast plant since its annual production is consistently

increasing
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Capital

Megawide Construction Corporation and Subsidiaries has a total equity which is

consist of the Total equity attributable to shareholders of the Parent Company and non-

controlling interest which includes common shareholder’s equity and preferred

shareholder’s equity. As of the 31 st of December 2017, the firm’s total capital was Php

18,135,444,269.00 up from Php 16,209,535,128.00 in December 2016. The increase in

total capital was the result of 27.27% or Php 1,393,263,336.00 increase in retained

earnings and 92.12% or Php 63,174,631.00 decrease in Revaluation reserves.

Entrepreneurship

Communicate

To promote effective communication with

stockholders, Internal and external stakeholders and the general

public by providing timely and relevant company information. The

Megawide Investor Relations Team holds analysts briefings,

participates in investor conferences and conducts site visits and

facilities tours.

Consistency

To ensure transparency and accuracy in information

disclosures for stockholders and provide access to management.

The Megawide IR Team together with the Chief Financial Officer

and Chairman meets with investment fund managers as well as

institutional investors to discuss in detail the company’s core

businesses and strategic plans.


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b. Construction Techniques and Processes

Megawide is frequently being invited to bid for major domestic low to high-rise

building projects. The scope of work on these projects generally include, among others,

site development, earthworks, structural and civil works, masonry works, architectural

finishes, electrical works, plumbing and sanitary works, fire protection works and

mechanical works.

1. In line with its risk policies while frequently invited to project biddings, Megawide

carefully selects which projects to participate in, based on the following criteria:

 Creditworthiness of the project owner determined through background

checks with banks and financial community, business and trade

associations, HLURB standing and major suppliers credit records; and

 Liquidity of the project owner determined through financial ratios and

financial performances for the past three years.

2. Megawide also evaluates each potential project based on the following:

 Size of the over-all development blueprint of the project and its

implementation timetable on phases;

 Complexities and limitations of the structural design of the high-rise

building project;

 Project location accessibility of heavy construction equipment and

proximity to clusters of on-going project sites;

 Logistics difficulties and limitations; and,

 Profitability.

3. Megawide negotiates the final construction price with the project owner
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4. Upon receipt of the Notice to Proceed or the Notice of Award for a project,

Megawide, depending on the agreement with the project owner, procures the

necessary building permits and other regulatory permits, and immediately

prepares for mobilization of construction equipment, manpower and materials

needed for the project

5. Megawide secures performance bonds and surety bonds required to obtain down

payment from the project owner, and contractor’s all risk insurance.

6. It also negotiates and finalizes the terms of its construction contract with the

project owner. The responsibilities and warranties of Megawide under its

construction contracts typically include on-time project turn-over and completion as

per an agreed timetable, adherence to the agreed material specifications and

construction methods, and warranty on workmanship and material defects. In the

normal course of business, on a per project basis, Megawide sub-contracts to

specialty or trade contractors such tasks as mechanical and electric works for its

projects.

7. During construction, quality control procedures are strictly followed. The QA/QC

Manager is responsible for quality assurance and quality control during production

and construction.

 Conducts on-site inspections to assure compliance.

 As standard procedure, concrete samples are tested by specialized

laboratories to ensure compliance with American Society for Testing and

Materials (ASTM), American National Standards Institute (ANSI) and

Construction Specifications Institute (CSI) specifications.


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8. To ensure that projects are on schedule, on-site project managers monitor and

control the progress of projects, mindful of the completion date pursuant to the

construction contract.

9. Upon project completion, the following activities are conducted as a condition to

project turnover to the owner:

 Megawide submits a Notice of Turn-Over and Completion to the project

owner;

 Megawide and the project owner conduct a joint inspection and punch

listing;

 Should there be no pending items for completion, the project owner issues

a Certificate of Completion;

 The project owner releases retention monies upon submission by

Megawide of a guarantee bond. The guarantee bond is typically valid for

up to 1 year from the project’s turnover date, and is required by project

owners to guarantee the quality of the materials provided, the equipment

installed and its workmanship.

Terms Granted to Customers

Bids for construction projects are typically accompanied with particular material

specifications and the kind of finishes to be used for the project. Deviations from agreed

material specifications are subject to variation orders. Consistent with industry practice,

Megawide normally requires the following key terms of payment in its construction

contracts:
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 A down payment of 15% - 20% of the contract price prior to commencement of

construction activities. Customers usually require that Megawide obtain a

performance bond to guarantee that it will execute the work in accordance with

the contract;

 Monthly progress billing (or interim billings). Progress billings are subject to pro-

rata recoupment of down payments, and retention monies equivalent to 10%

of the billed amount, to be reduced to 5% upon 50% completion of the project;

and

 The release of the 5% retention monies within one-year from full completion of

the project. Customers usually require that Megawide obtain a guarantee bond

to guarantee the quality of the materials provided, the equipment installed and

its workmanship
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Megawide Construction
c. Organizational Structure Corporation

Michael Cosiquien
Chairman/CEO

Edgar Saavedra
President/COO

Manuel Louie Ferrer Oliver Tan Jesus Chua


Chief Marketing Chief Financial Chief Strategy
Officer Officer Officer

Ronald Paulo Maila Angela Ong Emily Lim


Claudia Soriano President, Magewide Ronato Uy
VP, Operations VP, Human Resources VP, Cost, Contracts &
VP, Comptrollership
Foundation Procurement

Abigail Joan
Albert Saringo Enrico Gaw Jouie Lee Oliver
Coalco
VP, Operations VP, Batching Plant VP, CELD
VP, Investor Relations

Althea Oaminal Jennifer Lee


Corporate Secretary & Assist. Corporate
Corporate Information Secretary & Corporate
Center Information Center
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GMR MEGAWIDE
CEBU AIRPORT CORPORATION
Board of Directors

Srinivas Bommidala
Chairman

Manuel Louie Ferrer


President

Michael Cosiquien Edgar Saavedra Sidharath Kapur Puvan Sripathy


Director Director Director Director

Oliver Tan Florentino Tuason, Jr.


Treasurer Corporate Secretary
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MWM TERMINALS, INC.


Board of Directors

Michael Cosiquien
Chairman

Edgar Saavedra Jesus Chua Wilson Lim Wilson Jesse Lim, Jr Abraham Uypeckcuat
Director Director Director Director Director

MEGAWIDE FOUNDATION
Board of Directors

Manuel Louie Ferrer


Chairman

Maila Angela Ong


President

Edgar Saavedra Michael Cosiquien Ariel Querubin


Director Director Independent Director

Oliver Tan Marie Arcie Sercado


Treasurer Corporate Secretary
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SWOT Analysis

Megawide Construction Corporation and Subsidiaries operates in an

industry with an intense competition. In order to compete in such industry, the

firm need to analyse the components found inside and outside to come up with

strategies. SWOT Analysis is a simple but useful framework for analysing the

organization's strengths and weaknesses, and the opportunities and threats that

the firm may face. It helps focus on the strengths, minimize threats, and take the

greatest possible advantage of opportunities available

STRENGTHS WEAKNESSES
 Using of Advance Technology
 Strong research on adapting and  Miscommunication amongst
developing workers
 High Reputation  Long working hours for employees
 Having the Financial strength and  Lack of coordination
an increase in finances
 Strong and determined
employees/workers
 Organizational Capability and
Flexibility
OPPORTUNITIES THREATS
 Competitions in the construction
 Providing different job industry
opportunities  Concentration risk due to lack of
 Providing better facilities for new developers and contracts
employees for enhancement.  Risk of industrial or labor disputes
 Providing high charitable works.  Cancellation in construction
contracts and Philippine property
markets
 Slowdown in the Philippine
economy
 Exposure to liquidity from delayed
payments
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The Construction industry

The construction industry plays a significant role in a country’s economy.

The activities of the industry are also essential to the achievement of national

socio-economic development goals of providing shelter, infrastructure and

employment. As an investment-led sector, its importance is highly recognized by

the government. Government contracts with the Construction Industry help

develop infrastructure related to health, transport as well as education sector.

With this, it is clear that construction activities affect nearly every aspect of the

economy and that the industry is vital to the continued growth of a country.

Construction is the one of the largest industries worldwide. It is the overall

maze of large organizations and small companies that facilitate building of

everything from the smallest shelter to large structures. It is also a sector of

national economy which engages in preparation and improvements of land and

construction, alteration, and repair of buildings and structures.. It also undertakes

other related projects as its secondary activities such as the provision of

technical and engineering services as well as the manufacture and trading of

construction materials.

The Philippine Construction Industry

The Construction Industry is one of the most important sectors of the

Philippine economy. It is responsible for the erection of buildings and

infrastructures, development of roads and bridges that are necessary for a well-

functioning economic system. Output of the sector allows less disruptions in


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transporting goods and services across the country. The industry continues to

provide services that help not only in building of structures and facilities, but also

that of the nation.

The government makes it mandatory for all contractors in the country to

secure a license from the Philippine contractors Accreditation Board (PCAB)

before engaging in construction activities in the country

 A total 7,944 contractors’ licenses were issued as of April 2016.

 6% were large-sized contractors (AAA & AA)

 34% were medium-sized contractors (A & B) contractors

 The rest (C, D, Trade/E) composes the 60% of the contractors.

PESTLE ANALYSIS

POLITICAL

In a bid to further improve public infrastructure, raise potential economic

growth, and reduce poverty in the country, fiscal agencies are pushing for higher

infrastructure spending in 2017. This will entail not only allocating more funds to

build quality infrastructure, but also linking medium-term plan priorities to annual

budgetary considerations. - In 2015, the Philippines have tendered a large

number of PPP projects; a high volume of PPP projects are expected as well in

2016. Before President Aquino steps down in the mid-2016, around 15 PPP

projects are currently under procurement while around 10 more are getting

approval soon.
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One of the strongest infrastructure pipelines in the region of ASEAN

belongs to the Philippines. This is because of the number of public-private

partnership (PPP) projectsthat have been signed and are currently being

proposed. The proposed national budget for 2016 is P3.002-trillion The

government targets to spend P766.5 billion for public infrastructure which is

nearly 35% higher compared to last year's allocation of P569.9 billion. About 5%

of the Philippine gross domestic product (GDP) is going to be the budget

allocation for next year and greater than four times the P165 billion infrastructure

spending by the government in 2010. This was according to the Department of

Budget and Management.

However, some specific local challenges or risks that the country is facing

towards sustaining its infrastructure pipeline, which includes corruption and the

upcoming 2016 presidential election. The advent of a new administration can

cause disruption in the development. It can cause interruptions and delays in

infrastructure developments which can greatly affect the construction industry

ECONOMIC

Companies based outside a member country are anticipated to set up

headquarters in the country for expansion, following the ASEAN Economic

Community (AEC)’s vision to establish a single market that will give way to a

more open flow of capital across borders and faster transportation of goods,

services, and skilled labor, thus the need for more office, industrial, and

residential space to accommodate these businesses. The apparent need for


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more business spaces will boost the construction industry. Businesses in the

industry will compete to provide better commercial, industrial and residential

establishments to support the booming economy.

Local construction firm giants led by EEI Corp. are keen on carrying out

infrastructure projects in ASEAN countries. Firms and engineers coming from

the Philippines have established good track records in other parts of the world,

mainly in the Middle East, helping them gain confidence in taking on the ASEAN

challenge - A unified Southeast Asia also means that tariffs on different products

offered by the industry will be eliminated. In relation to this, a higher disposable

income is foreseen and this will equip consumers with more money to spend. So,

the need for more commercial spaces such as malls, retail complexes, and

shopping establishments is expected to grow.

The implication of more industry players signifies an increased rate of

construction activities as well. A primary driver of the rise in demand for office

spaces is the business process outsourcing (BPO) industry, as the country

remains to be among the most attractive locations for offshoring services.

SOCIAL

The majority of the population in the Philippines belongs to the working

class. According to Philippine Statistics Authority, among the 101,995,876 of the

Philippine population, 70.8% are part of the 15-44 age group. This is the portion

of society who are about to start their own families until those who are about to

retire from their respective careers. People in this segment are also the ones who
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usually start to invest in residential developments for they have the capacity to do

so. OFWs, expatriates, and young professionals are also driving the demand for

real properties This increases the demand for construction sector particularly in

the private construction accounts.

Housing Backlog

Despite the annual increase in real estate developments, housing backlog

in the Philippines, which is a result of the higher demand in the market than the

supply, currently stands at 5.8 million. Players in the industry sector say that

housing backlog would increase in the following years until 2030 if the demand

for mass houses in particular is not addressed. The government will tap shelter

agencies like the Pag-ibig Fund, and the National Housing Authority to decrease

the housing backlog by 50% with an annual target of 350,000 housing units. To

achieve this, the government administration needs to implement more PPP

programs in order to use the underutilized government lands.

TECHNOLOGICAL

The Philippine Constructors Association’s (PCA) gave way for the

government to invest in quality projects to address issues that the industry faces.

The Philippines considered technological innovations in infrastructure projects in

collaboration with Japan International Cooperation Agency (JICA). This imposed

productivity and will boost the nation’s economic growth through new projects in

the construction industry. The construction and engineering technologies from

Japan will help the Philippines build disaster-resilient infrastructures that would
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mitigate the effects of climate change. Private Construction subsectors also

adapt innovation as cement manufacturers such as Holcim Group produced a

green sustainable solution for cement.

LEGAL

Under Section 3 of this PD, the CIAP shall exercise authority, jurisdiction

and supervision over the following agencies which shall act as its implementing

arms (IAs):

 Philippine Contractors Accreditation Board (PCAB) – to assume the

functions of the abolished Philippine Licensing Board for Contractors under

RA 4566 (Contractors License Law)

 Philippine Overseas Construction Board (POCB) – to formulate, policies,

plans, programs and strategies for developing the Philippine overseas

construction industry; regulate and control the participation of construction

contractors in overseas construction projects; and administer the grant of

incentives for Filipino overseas contractors.

 Philippine Domestic Construction Board (PDCB) – to formulate, recommend

and implement policies, rules, regulations and guidelines and adjudicate

disputes arising from public construction projects.

 Construction Manpower Development Foundation (CMDF) – to formulate an

overall construction manpower development plan and strategies and

develop and implement manpower training programs for the construction

industry; among others

ENVIRONMENTAL
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Annually, approximately 80 typhoons develop above tropical waters, of

which 19 enter the Philippine region and six to nine make landfall, according to

the Joint Typhoon Warning Center (JTWC).Most frequent disasters affect

buildings, roads and other infrastructures The Construction industry plays a key

role in responding to disasters dealing with collapsed and damaged buildings

and infrastructure and providing temporary shelter and services to affected

communities and also in post-disaster reconstruction efforts Government

speeds up rehabilitation, construction, and recovery projects that will rebuild

assets, restore supply change, and strengthen capacity building. Construction

will be one of the priority sectors in employment generation. The players in the

construction industry lean towards environment friendly development project.


THREAT OF NEW ENTRANTS (LOW)

 High level of barriers to entry such as high


capital requirement
 Entrants are being filtered by strict regulations
 Relatively high risk of the industry and filled
with uncertainty
 New entrants face a challenge since existing
competitors have skilled economist
 Products are well differentiated (i.e. design)
and have higher consumer value

BARGAINING POWER OF
SUPPLIERS (LOW)
BARGAINING POWER OF BUYERS
(MODERATE)
 High supplier concentration
by over 898in number with
Rivalry among competitors  High demand from public and
players such as Holsim and
(MODERATE TO HIGH) private sectors
Lafarge dominating most
market
 Intense competition, not with new  The industry has numerous
 Switching costs of
entrants, but with existing number of players and buyers as
contractor firms are low well
companies
 Construction materials are
 Highly competitive peers in terms
readily available in the
market
of tech and innovation  Government brings the greatest
 Over crowded market dominated demand in the infrastructure
 Lafarge dominating most
by big constructing comp (i.e. EEI) sector which gives them great
market
 High operating and exit costs bargaining power but this is
 Intensifying competition counter balance by the large
which might force existing
among suppliers number of private customers
companies to compete in the
market
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THREATH OF SUBSTITUTE (LOW)

 Customers cannot reproduce the industry’s


expertise and proprietary technology

 It is unlikely that consumers will find a solution


that fits their requirements without employing
the assistance of a market player

 Consumer switching costs are high

Conclusion  Products have high differentiation

Overall, firms in the local construction industry are faced with an

increasingly challenging and fast-paced environment. In spite of this, there is

great anticipated positivity in the Philippine construction industry for the next

years. However, these should be matched by initiatives like increasing labor

productivity through job opportunities in order to sustain the competitiveness of

firms. The Philippine Construction industry is attractive because of the following

reasons:

 Many attractive opportunities due to long-term government contracts

 Growth in certain population segments and urbanization which could lead to

increase in housing backlogs

 Computer technology and new building techniques which would enable

companies to improve project implementation

 A number of public-private partnership (PPPs) initiatives by the government

 Environmental policy like climate change policy would imply investment

spending on improved infrastructure


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Nevertheless, the following challenges must be taken into consideration

to sustain growth prospects:

 Availability of funding to the projects being made available to the market

 Quality of the regulatory framework

 Increasing competition within the industry

 Increase in material and labor prices due to strong demand for

construction activities

 Lack of successful smooth implementation of the infrastructure projects

d. Pricing Strategy Employed

Megawide Construction Corporation uses cost-based pricing followed by

the bidding process to negotiate the final construction price with the project

owner. The cost of the project will be estimated based on the project’s

requirement in terms of size of the structure, manpower, equipment, raw

materials, and risk insurance that would be used during the entire construction

plan implementation.

SPACE MATRIX

Internal Strategic Position External Strategic Position


Competitive (CA) Industry (IS)
(-6 worst, -1 best) (+1 worst, +6 best)
-2 Market Share +6 Growth potential
-1 Brand image +5 Resource Utilization
-2 Technological Know +5 Financial Stability
-1 How +5 Consolidation
-1 Customer Loyalty +6 Profit Potential
-2 Product Life Cycle +6 Ease of Access
Control Over Supplier
Aver. Score: Aver. Score: +5.5
Total axis X-score: -1.5
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Financial (FS) Environment (ES)


(+6 worst, +1 best) (-6 Worst, -1 Best)

+3 Working capital -1 Technological Changes


+2 Return on Investment -1 Competitive Pressure
+2 Return on Assets -1 Inflation Rates
+2 Leverage -2 Barriers to entry
+1 Net Income -1 Price elasticity of demand
-1 Demand Viability

Aver. Score: Aver. Score:


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Aggressive
Conservative

(0.8, 4.1)

Defensive Competitive

According to the graph above, Megawide Construction Corporation and

Subsidiaries falls into the aggressive quadrant of the SPACE matrix. It is located

in the coordinates of +0.8 for x-component and a y-component of +4.1. this

shows that the company has an admirable position to use its IS in order to take

advantage of external opportunities, overcome weaknesses, and avoid threats.

So, in this position of Mega wide Construction Corporation and subsidiaries has

set of possible strategies such as market development, product development,

market penetration, forward integration, backward integration, horizontal


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diversification, concentric diversification and conglomerate diversification

depending on detailed conditions that face the company

e. Business Relations with other Firms

Suppliers

Megawide sources its raw materials, primarily steel, cement and

aggregates from external suppliers who are reliable and known in the

construction industry. In selecting its suppliers, it considers quality, pricing, and

efficient delivery of raw materials. It also does not depend on one or a limited

number of suppliers for raw materials and none of its major suppliers are its

affiliates. Suppliers usually give Megawide a 60-90 day payment period. Below

is a list of Megawide’s major third party independent suppliers:

NAME OF SUPPLIER RAW MATERIALS SUPPLIED


Steel Asia Manufacturing Corp. Steel
IVM Philippines Services & Contractor, Inc. Subcontractor of MEPF
Sofaire System Enterprises Subcontractor of MEPF
MC Montgear Electromech Corp. Plumbing and Sanitary works
Phases Electrical Contractor Subcontractor of MEPF
Kaskal Phils., Inc. Aluminum and Glass Works
Elecon Construction Corporation Electrical Works
MHI Engine System Philippines, Inc Electrical Works
Regan Industrial Sales, Inc Steel

 Steel Asia Manufacturing Corporation

Steel Asia Manufacturing Corporation manufactures and supplies reinforcing

steel bars for infrastructure, high-rise, commercial mall, school and office, factory,

residential, tourism, industrial, and power plant construction projects. It also offers

cutting and bending, rebar threading, and mechanical coupler supply services
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 IVM Philippine Services and Contractor, Inc

IVM PHILS SERVICES & CONTRACTOR INC. is a legally established

corporation that engages in the consultancy, design and construction activities as a

general contractor in the industrial/ manufacturing and commercial establishments.

The firm is also engaged in the electro-mechanical fabrication and installation of

LVSG, MDP, MTS/ATS, MCC, Panel boards, Wire ways, Cable trays, Enclosures,

Wire Gutters, Breakers and Bus bar Gutters, TTC and Pull Boxes. We supply and

install building electrical works.

 Sofaire System Enterprises

The firm is mainly engaged in the manufacturing and supply of air terminals.

Our product includes grilles, diffusers, louvers, and in-line air distribution items such

as volume dampers and fire dampers. Sofaire System Enterprises aims to provide

total quality management in achieving customer satisfaction.

 MC Montgear Electromec Corporation

MC MONTGEAR ELECTROMECH CORP. established on July 1998 and

former MC MONTGEHR ELECTRIC SUPPLIES CORP. Supplier of Electrical

Materials and On Year 2000 Starts to be a contractor. The firm employs people who

are project tested and exposed in different engineering application, in order to offer

and provide technical solutions to our customers in the field of electrical mechanical

systems. The company is capable in supplying equipment, components and systems

that may be needed in the project

 Phases Electrical Contractor


29

Phases Electrical Contractor Corporation specializes in construction of

electrical systems, design of electrical systems and consultancy for electrical

system. The projects ranges from residential buildings, commercial buildings and

industrial buildings. The firm is accredited by Philippine Contractors Accreditation

Board with Contractor’s License No. 30583 Specialty Contractor (Electrical)

Category “A”.

 Kaskal Phils, Inc.

KASEM Group has been in the facade construction industry for more than 50

years and was significantly involved in the construction of the largest glass facade of

its kind in Thailand, the Suvarnabhumi Airport. KASEM Group then founded

KASKAL Co., Ltd. in June 2005 starting with an investment of 100 Million Thai Baht.

KASKAL was created to be the technical center for facade design and engineering

so that it’s affiliated companies can continue and further develop the working ability

of the group to face the challenges in the building facade industry of the future.

 Elecon Construction Corporation

Elecon Construction Cop. Hires only the highest skilled personnel to perform

their work. The business firmly believe in their employee’s ability to provide clients

with the best in construction value and service.  

 MHI Engine System Philippines, Inc.

Our group, MITSUBISHI HEAVY INDUSTRIES ENGINE SYSTEM ASIA

PTE. LTD. is a wholly owned subsidiary of Mitsubishi Heavy Industries Asia Pacific

Pte Ltd., Singapore. Our history can be traced back to “Mitsubishi Singapore Heavy

Industries Ltd” in 1970s.To strengthen our business in Asian region, we established


30

our new network of MITSUBISHI HEAVY INDUSTRIES ENGINE SYSTEM ASIA

PTE. LTD., connecting 6 countries and areas.

 Regan Industrial Sales, Inc.

Regan Steel is a company that historically delivers a complete variety and

availability as well as services for steel in the Philippines that adhere to the highest

standards followed across the globe. They guarantee delivery and offer the best

competitive prices. Regan Steel strives to move forward in their success by

continuing to build strong relationships with business partners, clients, suppliers,

stakeholders, etc. The key component to Regan Steel’s success in industrial and

construction materials in the Philippines, such as steel, is that they are a people

oriented organization that prioritizes all their employees and outside people that they

are in contact with.

In order to mitigate the risk of price volatility in raw materials for its

projects, Megawide, upon contract award, immediately purchases major

materials such as steel and concrete for the entire project. All purchases are

done centrally, at Megawide’s head office, for all project site requirements.

Major Customers

Megawide is currently servicing the majority of high-rise condominium

projects in Metro Manila for several major local developers, primarily for its use of

High Technology Building Systems, and quality workmanship. While Megawide is

constantly invited to bid for major domestic high-rise building projects, it opts to

focus on a selected clientele that provides synergy in business operations and


31

better risk management. Approximately 64% of its Construction Order Book1 for

the past six years was repeat orders from existing customers.

 SMDC

SMDC is the publicly-listed, property development firm of the SM Group. It is

a leading developer of vertical villages integrated with commercial retail

environment. . It launched twelve condominium projects in 2009 with a total land

area of 707,861 square meters, and gross floor area of 2.0 million square meters.

SMDC is Megawide’s top customer for the past six years.

 Belle Corporation

Belle Corporation is a publicly-listed company, and is a leading developer of

high-end residential and leisure properties. The Belle group owns approximately

1,280 hectares of land.

 Rockwell Land Corporation

Rockwell Land Corporation is one of the premier real estate development

companies in the Philippines. It was formed in 1995, after the shutdown of the

thermal power plant, by the Lopez Group. Its primary task was to transform the old

thermal plant property into a high-end commercial business district, truly a

benchmark for innovation in the real estate industry.

 Megaworld Corporation

Megaworld is one of the country’s leading real estate developer and top BPO

office developer and landlord in the Philippines. Led by real estate magnate and
32

visionary, Dr. Andrew L. Tan, Megaworld pioneered the LIVE-WORK-PLAY-LEARN

township concept in the country. The company introduced the successful large-

scale, master- planned mixed-use developments such as Eastwood City in Libis,

Quezon City; Newport City in Pasay; 21McKinley Hill, Forbes Town Center,

McKinley West, and Uptown Bonifacio, all in Fort Bonifacio; Woodside City in Pasig;

Iloilo Business Park in Mandurriao, IloiloCity; the Mactan Newtown in Lapu-Lapu

City, Cebu and the Davao Park District in Davao.

 Shangri-La Properties

Shang Properties, Inc. is a luxury real estate developer in the Philippines.

They are the Philippines’ property development arm of the prestigious Kuok Group

and with core businesses in upscale office and retail leasing and residential

development. The company has a land bank of over 500 hectares located in

Batangas, Tagaytay, Cavite, and Mactan earmarked for future development. Backed

by the added value and advantages provided by its affiliates worldwide – Kerry

Properties, the Kuok Group, and Shangri- La International Hotels and Resorts, and

their ever-growing network of property, logistics and infrastructures assets, Shang

Properties, Inc. continues to set the pace for premium real estate projects in the

Philippines.

 8990 Holdings, Inc.

8990 Holdings, Inc. is the largest Mass housing developer in the Philippines

in terms of units licensed under B.P. 220 from 2011 to 2013, according the HLURB.

The Company has been developing Mass Housing Projects in high-growth areas
33

across the Visayas, Mindanao and Luzon since 2003. 8990’s DECA Homes and

Urban DECA Homes brands have also gained a strong reputation in the market,

resulting in 8990 garnering numerous awards such as Q Asia Magazine’s Best

Housing Developer for 2012 to 2013. 8990 has an identified pipeline of eight projects

with an existing and available land bank, which projects are scheduled to commence

between 2015 and 2019 and which in total are expected to provide approximately

64,000 units available for sale.

 Double Dragon Properties Corp.

Double Dragon Properties Corp. (DD) has undertaken several vertical and

horizontal developments since it started its commercial operations in April 2010.

DD’s vision is to accumulate one million square meters of leasable space by 2020

primarily through the rollout of 100 community malls across provincial cities in the

Philippines through its community mallchain brand “CityMall” under its subsidiary

CityMall Commercial Centers Inc. and through the development of two major

commercial office projects, DD Meridian Park and Jollibee Tower, both of which are

located in prime properties in Metro Manila.

 Southeast Asia Retail, Inc.

Southeast Asia Retail, Inc., the company behind the fast-growing membership

grocery retailer, Landers Superstore which sells imported and local products in bulk
34

and single-sized in two stores in Balintawak, Quezon City and Otis, Manila. It offers

premium membership for individuals and business use. Landers Superstore will also

be opening in Arcovia City and Alabang West as it partnered with Megaworld’s

newest township developments.

 Araneta Center, Inc.

Araneta Center, Inc. is the owner, developer and manager of the Araneta

Center. Built and developed on a 35–hectare (90 acre) property right at the heart of

Metro Manila, The Araneta Center is a hub of retail, entertainment, residential,

hospitality, and office developments that 22sees an estimated 1,000,000 visitors

daily.Araneta Center, Inc. is the owner of the Kia Theater, a reborn classic 60’s

entertainment landmark New Frontier Theater and a multi-function venue. It is also

the owner of the first building completed in the development (of the Araneta Group),

the Cyber Park Tower 1 (CPT1), a PEZA-registered tower and the Cyber Park Tower

2(CPT2) which construction is underway, the second PEZA-registered tower and is

expected to be completed in 2018. It also sighted future massive mall development of

the Gateway Mall 2 which encompasses one side of the Smart Araneta Coliseum

with target completion in 2020.

 Arthaland Corporation

ArthaLand is a focused real estate company bringing together a brain trust of

experts in property development and management. ArthaLand is an entrepreneurial,


35

world-class, boutique developer of unique, enduring, and sustainable projects in the

residential, office, and leisure segments. It is principally engaged in the realty

development business including home building and development. ArthaLand is the

owner-developer of the Arthaland Tower, a 30-storey office and commercial tower in

Taguig City designed to be LEED-compliant.

Independent Auditor

Punongbayan & Araullo, the independent auditors, appointed by the

stockholders of Megawide Construction Corporation and Subsidiaries, has

audited the financial statements of the Group in accordance with Philippine

Standards on Auditing, and in their report to the stockholders, has expressed

their opinion on the fairness of presentation upon completion of such audit.

f. Financial Viability

MEGAWIDE CONSTRUCTION CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CDECEMBER 31, 2017 and 2016

2017 2016
36

ASSETS

CURRENT ASSETS
4,930,939,17 6,265,285,131
Php
Cash and Cash Equivalents Php 7.00 .00
6,527,752,50 4,929,489,405
Trade and Other Receivables - Net 0.00 .00
Financial Assets at Fair Value through Profit 3,209,481,58 4,673,051,661
or Loss 1.00 .00
577,294,06 451,306,702
Construction Materials 9.00 .00
Cost in Excess of billings on uncompleted 2,095,587,09 3,014,946,269
contacts 9.00 .00
1,358,089,94 1,637,230,252
Other Current Assets 2.00 .00

18,699,144,36 20,971,309,420
TOTAL CURRENT ASSETS 8.00 .00

NON-CURRENT ASSETS
933,317,63 932,580,830
Available-for-sale Financial Assets 1.00 .00
1,104,218,56 896,612,177
Investments in associates and Joint Venture 6.00 .00
25,608,295,46 20,338,717,871
Concession Assets 3.00 .00
5,218,064,26 5,267,044,181
Propert, Plant and Equipment - Net 5.00 .00
135,610,00
-
Investment Properties 0.00
34,045,976
-
Deferred Tax Assets - Net .00
2,719,165,51 2,644,244,383
Other Non-Current Assets 2.00 .00

35,718,671,43 30,113,245,418
TOTAL NON-CURRENT ASSETS 7.00 .00

54,417,815,80 51,084,554,838
Php
TOTAL ASSETS Php 5.00 .00

CURRENT LIABILITIES
2,561,487,851. Ph 2,688,904,06
Interest-bearing loans and borrowings Php 00 p 8.00
5,245,248,904. 6,008,806,19
Trade and Other Payables 00 6.00
527,071,092.0 1,278,553,78
Advances from Customers 0 8.00
Billing in excess of cost on uncompleted 939,417,541.0 1,368,557,54
contracts 0 5.00
Other Current Liabilities 140,006,231,733. 113,849,93
37

00 7.00

9,413,231,733. 11,458,671,53
P
TOTAL CURRENT LIABILITIES Php 00 4.00

NON-CURRENT LIABILITIES
26,386,980,490. 23,073,759,91
Interest-bearing loans and borrowings 00 1.00
Post-employment defined benefit 173,266,213.0 112,500,31
obligation 0 7.00
70,533,741.0
Deferred tax liabilities - Net 0
238,359,359.0 230,087,94
Other Non-Current Liabilities 0 8.00

26,869,139,803. 23,416,348,17
TOTAL NON-CURRENT LIABILITIES 00 6.00

36,282,371,536. Ph 34,875,019,71
TOTAL LIABILITIES Php 00 p 0.00

EQUITY
Equity attributable to shareholders of the Parent
Company:
2,399,426,127. 2,399,426,12
Common Stock 00 7.00
40,000,000.0 40,000,00
Preferred Stock 0 0.00
(2,627,738,885. (2,627,738,88
Treasury Shares 00) 5.00)
8,776,358,765. 8,776,358,76
Additional Paid-In Capital 00 5.00
(3,949,890.0 (67,124,52
Revaluation Reserves 0) 1.00)
(22,474,837. (22,474,83
Other Revenues 00) 7.00)

Total equity attributable to shareholders of the 15,063,618,229. 13,607,180,26


Parent Company 00 2.00
3,071,826,040. 2,602,354,86
Non-Controlling Interests 00 6.00
18,135,444,269. 16,209,535,12
TOTAL EQUITY 00 8.00

54,417,815,805. Ph 51,084,554,83
TOTAL LIABILITIES AND EQUITY Php 00 p 8.00
38

MEGAWIDE CONSTRUCTION CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CDECEMBER 31, 2017 AND 2016

NOTES 2017 2016


REVENUES 19
16,712,638,593.0 15,786,162,784.0
Contract Revenues 0 0
2,298,404,890.0 1,871,978,237.0
Airport Operations Revenues 0 0
148,099,539.0
Airport Merchandising Operations Revenues 0  
19,159,143,022.0 17,658,141,021.0
0 0
DIRECT COST 20, 21
14,084,101,553.0 13,426,336,857.0
Contract Cost 0 0
420,246,176.0 360,951,169.0
Cost of Airport Operations 0 0
40,797,109.0
Cost of Airport Merchandising Operations 0  
14,545,144,838.0 13,787,288,026.0
0 0
4,613,998,184.0 3,870,852,995.0
GROSS PROFIT 0 0
1,191,277,182.0 1,091,658,062.0
OTHER OPERATING EXPENSES 21 0 0
3,422,721,002.0 2,779,194,933.0
OPERATING PROFIT 0 0
OTHER INCOME (CHARGES) 23
(822,016,926.0 (669,991,929.0
Finance Cost 0) 0)
168,426,343.0 184,426,387.0
Finance Income 0 0
57,727,980.0 74,378,856.0
Others - Net 0 0
(595,862,603.0 (411,186,686.0
0) 0)
2,826,858,399.0 2,368,008,247.0
PROFIT BEFORE TAX 0 0
579,049,390.0 448,312,507.0
TAX EXPENSE 24 0 0
2,247,809,009.0 1,919,695,740.0
NET PROFIT 0 0
Net Profit Attributable To: 1
1,781,192,211.0 1,559,090,997.0
Shareholders of the Parent Company 0 0
466,616,798.0 360,604,743.0
Non-Controlling Interests 0 0

2,247,809,009.0 1,919,695,740.0
0 0

EARNINGS PER SHARE - BASIC AND


DILUTED 28 0.70 0.57
39
40

MEGAWIDE CONSTRUCTION CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CDECEMBER 31, 2017 and 2016

2017 2016 Increase / (Decrease


Amount Percent
ASSETS

CURRENT ASSETS
Ph Ph Ph (
21.3
4,930,939,177.00 6,265,285,131.00 1,334,345,954.00 )
0
Cash and Cash Equivalents p p p
32.4
6,527,752,500.00 4,929,489,405.00 1,598,263,095.00
Trade and Other Receivables - Net 2
(
31.3
3,209,481,581.00 4,673,051,661.00 1,463,570,080.00 )
2
Financial Assets at Fair Value through Profit or Loss
27.9
577,294,069.00 451,306,702.00 125,987,367.00
Construction Materials 2
(
30.4
2,095,587,099.00 3,014,946,269.00 919,359,170.00 )
9
Cost in Excess of billings on uncompleted contracts
(
17.0
1,358,089,942.00 1,637,230,252.00 279,140,310.00 )
5
Other Current Assets

Ph Ph Ph (
10.8
18,699,144,368.00 20,971,309,420.00 2,272,165,052.00 )
3
TOTAL CURRENT ASSETS p p p
41
42

NON-CURRENT ASSETS
933,317,631.0 932,580,830.0
Available-for-sale Financial Assets 0 0 736,801.00 0.08
1,104,218,566.0 896,612,177.0
Investments in associates and Joint Venture 0 0 207,606,389.00 23.15
25,608,295,463.0 20,338,717,871.
Concession Assets 0 00 5,269,577,592.00 25.91
5,218,064,265.0 5,267,044,181.0 (
PropertyR, Plant and Equipment - Net 0 0 48,979,916.00 0.93 )
135,610,000.0
Investment Properties 0 135,610,000.00 100.00
34,045,976.0
(
0
Deferred Tax Assets - Net 34,045,976.00 100.00 )
2,719,165,512.0 2,644,244,383.0
Other Non-Current Assets 0 0 74,921,129.00 2.83
0.00
35,718,671,437.0 30,113,245,418.
TOTAL NON-CURRENT ASSETS 0 00 5,605,426,019.00 18.61
0.00
Ph 54,417,815,805.0 Ph 51,084,554,838.
TOTAL ASSETS p 0 p 00 3,333,260,967.00 6.52

CURRENT LIABILITIES
2,561,487,851.0 Ph 2,688,904,068.0 Ph
Interest-bearing loans and borrowings Php 0 p 0 p 127,416,217.00 ( 4.74 )
5,245,248,904.0 6,008,806,196.0
Trade and Other Payables 0 0 763,557,292.00 ( 12.71 )
527,071,092.0 1,278,553,788.0
Advances from Customers 0 0 751,482,696.00 ( 58.78 )
939,417,541.0 1,368,557,545.0
Billing in excess of cost on uncompleted contracts 0 0 429,140,004.00 ( 31.36 )
140,006,231,733.0 113,849,937.0
Other Current Liabilities 0 0 139,892,381,796.00 122874.36

9,413,231,733.0 Ph 11,458,671,534. Ph
TOTAL CURRENT LIABILITIES Php 0 p 00 p 2,045,439,801.00 ( 17.85 )
43
44

NON-CURRENT LIABILITIES
26,386,980,490.0 23,073,759,911. Ph
Interest-bearing loans and borrowings Php 0 00 p 3,313,220,579.00 14.36
173,266,213.0 112,500,317.0
Post-employment defined benefit obligation 0 0 60,765,896.00 54.01
70,533,741.0
Deferred tax liabilities - Net 0 70,533,741.00 100.00
238,359,359.0 230,087,948.0
Other Non-Current Liabilities 0 0 8,271,411.00 3.59
26,869,139,803.0 23,416,348,176.
TOTAL NON-CURRENT LIABILITIES 0 00 3,452,791,627.00 14.75
36,282,371,536.0 34,875,019,710. Ph
TOTAL LIABILITIES Php 0 Php 00 p 1,407,351,826.00 4.04

EQUITY
2,399,426,127.0 2,399,426,127.0 Ph
Common Stock 0 0 p 0.00 0.00
40,000,000.0 40,000,000.0
Preferred Stock 0 0 0.00 0.00
(2,627,738,885. (2,627,738,885.0
Treasury Shares
00) 0) 0.00 0.00
8,776,358,765.0 8,776,358,765.0
Additional Paid-In Capital 0 0 0.00 0.00
(3,949,890.0 (67,124,521.0
Revaluation Reserves 0) 0) 63,174,631.00 ( 92.12 )
(22,474,837.0 (22,474,837.0
Other Revenues 0) 0) 0.00 0.00
6,501,996,949.0 5,108,733,613.0
Retained Earnings 0 0 1,393,263,336.00 27.27
Total equity attributable to shareholders of the Parent 15,063,618,229.0 13,607,180,262.
1,456,437,967.00
Company 0 00 10.70
3,071,826,040.0 2,602,354,866.0
Non-Controlling Interests 0 0 469,471,174.00 18.04
18,135,444,269.0 16,209,535,128.
TOTAL EQUITY 0 00 1,925,909,141.00 11.88

Ph 54,417,815,805.0 Ph 51,084,554,838. Ph
TOTAL LIABILITIES AND EQUITY p 0 p 00 p 3,333,260,967.00 6.52
45

MEGAWIDE CONSTRUCTION CORPORATION AND SUBSIDIARIES


CONSOLIDATED INCOME STATEMENT
DECEMBER 31, 2017 AND 2016

2017 2016 Increase / (Decrease)


REVENUES
Ph Ph Ph
16,712,638,593.00 15,786,162,784.00 926,475,809.00 5.87
Contract Revenues p p p
Airport Operations Revenues 2,298,404,890.00 1,871,978,237.00 426,426,653.00 22.78
Airport Merchandising Operations Revenues 148,099,539.00     148,099,539.00 100.00
19,159,143,022.00   17,658,141,021.00 1,501,002,001.00 8.50
DIRECT COST
Contract Cost 14,084,101,553.00 13,426,336,857.00 657,764,696.00 4.90
Cost of Airport Operations 420,246,176.00 360,951,169.00 59,295,007.00 16.43
Cost of Airport Merchandising Operations 40,797,109.00     40,797,109.00 100.00
14,545,144,838.00   13,787,288,026.00 757,856,812.00 5.50

GROSS PROFIT 4,613,998,184.00 3,870,852,995.00 743,145,189.00 19.20


OTHER OPERATING EXPENSES 1,191,277,182.00   1,091,658,062.00 99,619,120.00 9.13
OPERATING PROFIT 3,422,721,002.00   2,779,194,933.00 643,526,069.00 23.16
OTHER INCOME (CHARGES)
(822,016,926.00 (669,991,929.00
152,024,997.00 22.69
Finance Cost ) )
Finance Income 168,426,343.00 184,426,387.00 16,000,044.00 ( 8.68 )
Others - Net 57,727,980.00   74,378,856.00 16,650,876.00 ( 22.39 )
(595,862,603.00 (411,186,686.00
  184,675,917.00 44.91
) )
PROFIT BEFORE TAX 2,826,858,399.00 2,368,008,247.00 458,850,152.00 19.38
TAX EXPENSE 579,049,390.00   448,312,507.00 130,736,883.00 29.16
Ph Ph Ph 328,113,269.0
2,247,809,009.00 1,919,695,740.00 17.09
NET PROFIT p p p 0
46
47

Horizontal Analysis

Current Assets decreased by 10.83%. This decrease is a result 21.30 %

decrease in cash and cash equivalents, 31.32% decrease in financial assets at fair

value through profit and loss, 30.49% decrease in cost in excess billing on uncompleted

contacts and 17.05 % decrease in other current assets. The decrease in cash and cash

equivalents is due to the cost incurred in the construction of Terminal 2 of Cebu Mactan

International Airport amounting to P5.42 billion. Meanwhile, the decrease in financial

assets at fair value through profit and loss is due to termination of the short-term

placements of the Parent to for working capital and investment purposes.The decrease

in cost in excess billing on uncompleted contacts is typically due to realization of catch

up of billings versus actual cost incurred to date for projects nearing completion. Lastly,

the decrease in other current assets is due to amortization of prepaid assets of the

Group and decreased in input vat as a result of output vat payments and usage of

creditable withholding tax to pay the Group’s income tax expense

Non-current assets increased by 19% or P5.61 billion. This increase is the result

of 23% increase in Iinvestments in associates and joint venture which is due to the

infused cash in MWM, Terminals Inc. (MWMTI) amounting to P204 Million by the Parent

Company; 26 5 increased in concession Assets due to capital investments of airport

subsidiary GMCAC related to the construction of the new Terminal 2 of Mactan-Cebu

International Airport; and 3% increase in other non-current assets due to additional

placement of unrestricted cash amounting to P216 million in the Restricted Funds of

GMCAC’s “Cash Flow Waterfall Accounts”


48

Total liabilities and Owner’s Equity Increased by 6.52% despite decreased in the

current liabilities. This can be explained by 23% increase in other current liabilities 15%

increase in non-current liabilities and Equity attributable to Parent increased by 11% or

P1.46 billion. Sources of businesses funds are generated either from the investment of

shareholders or loans from banks r financial institution. In the case of Megawide, the

firm both acquired fund through loans and through additional investments. The increase

in non-current assets is due to accrual of retirement obligation of the Parent, GMCAC’S

availment of P3.42 billion loan in 2017 for the construction of Terminal 2 and due to the

timing difference of the actual cost and estimated cost of the construction segment

The Group Revenue increased by 9% or P1.50 billion. This increase in revenue

has brought the increase in net profit by 17.09% resulting from construction revenues

reached Php16.7 billion, a 6% growth from last year’s Php15.8 billion, due to the private

sector projects. Looking at the other components of the income statement, direct cost

increased by 4.09%. Even with this increase in direct cost, gross profit registered a

19.20% increase. Other operating expenses showed 9.13 % increase. Despite this,

income from operations recorded a 23.16% increased. The firm’s net profit showed

17.09 % increased despite of 29.16 % increase in tax expense. The magnanimous

increased in the company’s revenue caused an increase in the overall net income.
49

MEGAWIDE CONSTRUCTION CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2017 AND 2016

2017 Percent 2016 Percent


ASSETS
CURRENT ASSETS
4,930,939,177.00 9.06 6,265,285,131.00 12.26
Cash and Cash Equivalents P P
Trade and Other Receivables - Net 6,527,752,500.00 12.00 4,929,489,405.00 9.65
Financial Assets at Fair Value through Profit or Loss 3,209,481,581.00 5.90 4,673,051,661.00 9.16
Construction Materials 577,294,069.00 1.06 451,306,702.00 0.88
Cost in Excess of billings on uncompleted contracts 2,095,587,099.00 3.85 3,014,946,269.00 5.90
Other Current Assets 1,358,089,942.00 2.50 1,637,230,252.00 3.20

TOTAL CURRENT ASSETS 18,699,144,368.00 34.36 20,971,309,420.00 41.05

NON-CURRENT ASSETS
Available-for-sale Financial Assets 933,317,631.00 1.72 932,580,830.00 1.83
Investments in associates and Joint Venture 1,104,218,566.00 2.03 896,612,177.00 1.75
Concession Assets 25,608,295,463.00 47.06 20,338,717,871.00 39.81
Propert, Plant and Equipment - Net 5,218,064,265.00 9.59 5,267,044,181.00 10.31
Investment Properties 135,610,000.00 0.25
Deferred Tax Assets - Net 34,045,976.00 0.07
Other Non-Current Assets 2,719,165,512.00 5.00 2,644,244,383.00 5.18

TOTAL NON-CURRENT ASSETS 35,718,671,437.00 65.64 30,113,245,418.00 58.95

54,417,815,805.00 100 51,084,554,838.00 100.


TOTAL ASSETS P P
LIABILITIES AND EQUITY
50

CURRENT LIABILITIES
2,561,487,851. Ph
4.71 2,688,904,068.00 5.26
Interest-bearing loans and borrowings Php 00 p
5,245,248,904. 11.7
9.64 6,008,806,196.00
Trade and Other Payables 00 6
527,071,092.
0.96 1,278,553,788.00 2.50
Advances from Customers 00
939,417,541.
1.74 1,368,557,545.00 2.69
Billing in excess of cost on uncompleted contracts 00
140,006,345.
0.25 113,849,937.00 0.22
Other Current Liabilities 00
9,413,231,733. Ph 22.4
17.30 11,458,671,534.00
TOTAL CURRENT LIABILITIES Php 00 p 3
NON-CURRENT LIABILITIES
26,386,980,490. 45
48.49 23,073,759,911.00
Interest-bearing loans and borrowings 00 .17
173,266,213.
0.32 112,500,317.00 0.23
Post-employment defined benefit obligation 00
70,533,741.
0.13
Deferred tax liabilities - Net 00
238,359,359.
0.44 230,087,948.00 0.45
Other Non-Current Liabilities 00
26,869,139,803. 45.8
49.38 23,416,348,176.00
TOTAL NON-CURRENT LIABILITIES 00 1
36,282,371,536. 68.2
66.67 34,875,019,710.00
TOTAL LIABILITIES 00 7
15,063,618,22 26.6
27.68 13,607,180,262.00
Total equity attributable to shareholders of the Parent Company 9.00 4
3,071,826,04 5.0
5.64 2,602,354,866.00
Non-Controlling Interests 0.00 9
18,135,444,26 31.7
33.33 16,209,535,128.00
TOTAL EQUITY 9.00 3
Ph 54,417,815,80 Ph
100 51,084,554,838.00 100 
TOTAL LIABILITIES AND EQUITY p 5.00 p
51

MEGAWIDE CONSTRUCTION CORORATION AND SUBSIDARIES


CONSOLIDATED INCOME STATEMENT
DECEMBER 31, 2017 AND 2016

2017 Percent 2016 Percent


REVENUES
Contract Revenues Php 16,712,638,593.00 Php 15,786,162,784.00
Airport Operations Revenues 2,298,404,890.00 1,871,978,237.00
Airport Merchandising Operations
148,099,539.00      
Revenues
17,658,141,02
19,159,143,022.00 100.00   100.00
1.00
Contract Cost 14,084,101,553.00 13,426,336,857.00
Cost of Airport Operations 420,246,176.00 360,951,169.00
Cost of Airport Merchandising
40,797,109.00      
Operations
14,545,144,838.00 75.92   13,787,288,026.00 78.08
GROSS PROFIT 4,613,998,184.00 24.08 3,870,852,995.00 21.92
OTHER OPERATING EXPENSES 1,191,277,182.00 6.21   1,091,658,062.00 6.18
OPERATING PROFIT 3,422,721,002.00 17.86   2,779,194,933.00 15.74
OTHER INCOME (CHARGES)
(669,991,929.00
(822,016,926.00)
Finance Cost )
Finance Income 168,426,343.00 184,426,387.00
Others - Net 57,727,980.00     74,378,856.00
(411,186,686.00
(595,862,603.00) 3.11   2.32
)
PROFIT BEFORE TAX 2,826,858,399.00 14.75 2,368,008,247.00 13.41
TAX EXPENSE 579,049,390.00 3.02   448,312,507.00 2.54
NET PROFIT Php 2,247,809,009.00 11.73 Php 1,919,695,740.00 10.87
52

Vertical Analysis

Current Assets was 41.05 % of the total assets in 2016. However the

percentage decreased to 34.36 % in 2017. This was due to the significant

decrease in cash and cash equivalents, financial assets at fair value through

profit and loss, and cost in excess billings on uncompleted contracts. Non –

current assets was 58.09% of the total assets in 2016 and 65.64% in 2017. The

increase is the result of a 100% increase in investment properties and increase

of other non-current asset components.

Current Liabilities was 22.43% of the total liabilities and equity in 2016, but

decreased to 17.30% in 2017. This is opposite to non-current liabilities which was

45.81 % of the total liabilities and equity in 2016 but increased to 49.38% in

2017. The company. The increase is primarily due to GMCAC’S availment of

P3.42 billion loan in 2017. The availment was made based on the drawdown

schedule with the bank to finance the construction of Terminal 2. The

percentage of equity to total liabilities and equity was 31.73 in 2016 and 33.33 in

2017. This means that the equity financed y creditors was 68.27% in 2016 and

66.67% in 2017. This is not a good sign as almost 70% of its capital is financed

by creditors. If Megawide would continue to increase its revenue then it will be

easy to cover for their liabilities.

From the consolidated income statement, the percentage of net income to

net revenue increased from 10.87% to 11.73%. The increase is caused by a

5.87% increase in revenue. The percentage of direct cost in relation to net

revenue indicates a minimal decreased from 78.08% in 2016 to 75.92% in 2017.


53

Despite this decrease, income from operations showed an increase from 15.74%

to 17.86% in 2017. The firm’s amount of revenue was able to cover all the

expenses incurred in the operations.

Liquidity ratios
Current ratio
Formula:
6,265,285,131. 4,930,939,177.
Current Assets
Cash and Cash Equivalents P 00 00
Current Liabilities
4,929,489,405. 6,527,752,500.
Trade and Other Receivables - Net 00 00
4,673,051,661. 3,209,481,581.
Financial Assets at Fair Value through P/L 00 00
451,306,702. 577,294,069.
Construction Materials 00 00
Cost in Excess of billings on Uncompleted 3,014,946,269. 2,095,587,099.
contracts 00 00
1,637,230,252. 1,358,089,942.
Other Current Assets 00 00
20,971,309,420. 18,699,144,368.
  TOTAL CURRENT ASSETS   00   00  
2,688,904,068. 2,561,487,851.
Interest-bearing loans and borrowings 00 00
6,008,806,196. 5,245,248,904.
Trade and Other Payables 00 00
1,278,553,788. 527,071,092.
Advances from Customers 00 00
Billing in excess of cost on uncompleted 1,368,557,545. 939,417,541.
contracts 00 00
113,849,937. 140,006,345.
Other Current Liabilities 00 00
11,458,671,534. 9,413,231,733.
TOTAL CURRENT LIABILITIES 00 P 00
1
CURRENT RATIO = .83 = 1.99

Current ratio for 2016 is 1.83 to while that of 2017 is 1.99 is to 1. This

means that for 2016, Megawide has Php 1.83 of current assets that can be

converted to cash to pay every peso of current liability while that of 2017, the

company has Php 1.99 of its current assets to cover ever peso of current liability.
54

Current ratio for 2017 increased signifying more liquidity for the company

although the company is satisfactory liquid in 2016.

Quick Ratio

Formula:
Cash + Short Term Investments + Trade Receivables
Current Liabilities

201 201
6 7

Ca
sh 6,2
and 65, 4,93
Cash 285 0,93
Equi ,13 9,17
valen 1.0 7.00
ts 0
Tr
ade
and 4,9
Othe 29, 6,52
r 489 7,75
Rece ,40 2,50
ivabl 5.0 0.00
es - 0
Net
1 1
1,1 1,4
94, 58,
774 691
TOTAL ,53 ,67
CURRENT 6.0 7.0
ASSETS   0   0
Int
erest
-
beari 2,6
ng 88, 2,56
loans 904 1,48
and ,06 7,85
borro 8.0 1.00
wing 0
s
Tr
ade 6,0 5,24
and 08, 5,24
55

Other Payables 806,196.00 8,904.00


1,278,553,788. 527,071,092.0
Advances from Customers 00 0
Billing in excess of cost on uncompleted 1,368,557,545. 939,417,541.0
contracts 00 0
113,849,937. 140,006,345.0
Other Current Liabilities 00 0
11,458,671,534. 9,413,231,733.0
TOTAL CURRENT LIABILITIES 00 P 0

0 1.
QUICK RATIO = .98:1 = 22 :1

Note: Since there are no short-term investment, only cash and cash equivalents

and receivables are added.

The quick ratio for Megawide is 0.98 is to 1 for 2016 and 1.22 to 1 for 2017. This

means that for 2016, the company has Php 0.98 of quick assets for every Php 1 of

current liability and Php 1.22 for 2017.


56

Working Capital

Formula:
Current Assets - Current Liabilities

2016

Current Assets Current Liabilities Working Capital


- =
Php 20,971,309,420 Php 11,458,671,534 Php 9,512,637,886

2017
Current Assets Current Liabilities Working Capital
- =
Php 18,699,144,368 Php 9,413,231,733 Php 9,285,912,635

The working capital of Megawide Construction Corporation and Subsidiaries

is Php 9,512,637,886.00 in 2016 and Php 9,285,912,635.00 in 2017. This means

that or 2017, the company is less liquid than the previous year in terms meeting

short term obligations especially since cash and receivables occupy a big

percentage of the current assets.

Solvency Ratios
57

Debt Ratio
Formula:
Current Assets
Current Liabilities

2016 2017
11,458,671,5 9,413,231,7
Current P 34.00 P 33.00
23,416,348,1 26,869,139,8
Non-Current 76.00 03.00
34,875,019,710 36,282,371,536
TOTAL LIABILITIIES .00 .00
             
20,971,309,4 18,699,144,3
Current Assets 20.00 68.00
30,113,245,4 35,718,671,4
Non-Current Assets 18.00 37.00
51,084,554,8 54,417,815,8
TOTAL ASSETS P 38.00 P 05.00

66.
Debt Ratio 68.27 67

In 2016, 68.27% of the assets was financed by creditors. This went slightly

lower in 2017 as debt ratio was 66.67%. The upward trend in debt ratio is not a good

sign as the company heavily sources its financing from creditors. The company is

considered as medium leveraged and its becoming more risky and risky for the

company because most of its assets are owned by creditors. In simple words, in the

event of incapacity, the firm will have to sell most of its assets to pay its creditors.

The most possible way to reduce the company’s debt is to increase its income

through service sales.

Equity ratio
Formula:
Total equity
Total Assets
58

2016 2017

16,209,535,128. 18,135,444,269.
TOTAL EQUITY 00 00
             
20,971,309,42 18,699,144,36
Current Assets 0.00 8.00
30,113,245,41 35,718,671,43
Non-Current Assets 8.00 7.00
51,084,554,83 54,417,815,80
TOTAL ASSETS   8.00   5.00
EQUITY RATIO 31.73 33.32

Megawide Construction Corporation and Subsidiaries’ equity ratio is 31.73%

in 2016. This went slightly up in 2017 at 33.32%. This are low rate for the company

as these indicate dependence on creditors for sources of funds. In 2016, the firm’s

shareholder’s only owns 31.73% of its company’s assets while the creditors own

68.27% of the total assets. For 2017, the shareholders only own 33.32% of the

company’s assets while the creditors own 66.67% of the total assets

Debt to Equity Ratio

Formula:
Total Liabilities
Total Equity
59

2016 2017
11,458,671,53 9,413,231,73
Current P 4.00 P 3.00
23,416,348,17 26,869,139,80
Non-Current 6.00 3.00
34,875,019,710. 36,282,371,536.
TOTAL LIABILITIIES   00 00
             
16,209,535,128. 18,135,444,269.
TOTAL EQUITY 00 00

2. 2.
Debt To Equity Ratio 15 00

The Debt to equity ratio is decreasing through the years. In 2016m debt equity

ratio was 2.15:1 which meant that for every Php 1 financed by the owner in the

assets of the business, Php 2.15 was financed by the creditors. The following year

showed a slightly lower ratio that for every Php 1 financed by the owner, Php 2.00

was financed by the creditors. This is very favourable since the company will pay a

lower interest for the use of creditor funds in the business.

Profitability ratios
60

Gross Profit Ratio

Formula:
Gross Profit
Revenue

2016

3,870,852,
Gross Profit PHP
995.00
17,658,141,0
Net Sales PHP
21.00

= 21.92%

2017

4,613,998,
Gross Profit PHP
184.00
19,159,143,0
Net Sales PHP
22.00

= 24.08%
61

Megawide Construction Corporation and Subsidiaries gross profit ratio was

21.92% in 2016. However it went slightly higher in 2017 at 24.08%. The gross profit

for three years was unfavourable for the company not just because of the mark

down, but also because the margins do not reach 50% which will be used to absorb

the operating expenses

Operating profit Margin

Formula:
Gross Profit
Revenue

2016

Operating Income PHP 2,779,194,933.00


17,658,141,0
Net Sales PHP
21.00

= 15.74%

2017

Operating Income PHP 3,422,721,002.00


19,159,143,0
Net Sales PHP
22.00

= 17.86%
62

The operating margin has an upward trend. From 15.74% in 2016, it went up

to 17.86% in 2017. This indicates that the firm is continuously trying to efficiently

manage its expenses. A closer look at the firm’s income statement reveals that the

direct cost show an increasing trend. If this upward trend in operating expenses will

continue, it follows that the operating margin will turn into a downward trend unless

the revenue will continue to have an upward trend while there will be changes on the

direction of direct cost and other expenses.

Net Profit Margin

Formula:
Net Income
Revenue

2016

Net Income PHP 1,919,695,740.00


17,658,141,0
Revenue PHP
21.00

= 10.87%

2017

Net Income PHP 2,247,809,009.00


19,159,143,0
Revenue PHP
22.00

= 11.73%
63

The net profit margin of Megawide Construction Corporation and Subsidiaries

continue to increase every year. In 2016, the margin was 10.97%, this went slightly

up at 11.73% in 2017. The management should exert more effort to increase its

revenue and cut on expenses in order to improve the net income for future

operations
64

Return on Assets

Formula:
Net Income
Average Total Assets

2016
Beginning and Ending Assets PHP 48,514,834,211.00 +
=
for the Year 51,084,554,838..00

Average Total Assets = PHP 49,799,694,524.50

Net Income PHP 1,919,695,740.00


=
Average Total Assets PHP 49,799,694,524.50

Return on Assets = 3.85%

2017
Beginning and Ending Assets PHP 51,084,554,838.00
=
for the Year +54,417,815,805.00
2

Average Total Assets = PHP 52,751,185,321.50

Net Income PHP 2,247,809,009.00


=
Average Total Assets PHP 52,751,185,321.50

Return on Assets = 4.26%

The return on assets of Megawide Construction Corporation was 3.85% In

2016. This slightly increase in 2017 at 4.26%. This is a relatively low ration and

indicates that the assets are not fully utilized to generate income

Return on Equity
65

Formula:
Net Income
=
2016 Average Owner's Equity
PHP 16,604,203,384.00+
=
Beginning and Ending Equity 16,209,535,128.00
2

Average Equity = 16,406,869,256.00

Net Income 1,919,695,740.00


=
Average Equity 16,406,869,256.00

Return On Equity = 11.70%

2017
PHP 16,209,535,128.00 +
=
Beginning and Ending Owner's Equity 18,135,444,269.00
2

Average Owners Equity = PHP 17,172,489,698.50

Net Income PHP 2,247,809,009.00


=
Average Owners Equity PHP 17,172,489,698.50

Return On Equity = 13.09%

The return on equity of Megawide Construction Corporation and Subsidiaries

on 2016 is 11.70% while that of 2017 is 13.09%. The increasing trend on the firm’s

return on equity is favourable for the company as it signifies that the company is

increasing its efforts in utilizing its equity to generate revenues.

g. Industry Concentration Ratio


66

The table below indicates the percentage of the market shares in the industry

of construction. Makati Development has the largest percentage of market share with

the value of 49.31%, meanwhile the Atlantic, Gulf and Pacific Company of Manila

Incorporated has 23.57% market share. The lowest percentage of market share was

the D.M Consunji with 11.08% market share and Megawide Construction

Corporation has 23.57% market share, a though competition for Megawide in the

construction industry.

Revenue ( in million Market


Name of Company
peso) share
Makati Development 3,667 49.31%
Megawide Construction
1,193 16.04%
Corporation
Atlantic, Gulf and Pacific
1,753 23.57%
Company of Manila, Inc
D.M. Consunji 824 11,08%
TOTAL 7,437 100.00%
Source:

h. Corporate Social Responsibility

The Company, through Megawide Foundation, provides opportunities to the

marginalized and disadvantaged communities where Megawide operates, especially

in areas where the company’s expertise and resources are needed. Its vision is to be

a leading agent of transformation, inspiring people and communities to practice

excellence and innovation. To achieve this, the Foundation has identified three
67

pillars where it aims to provide the most support in terms of expertise and

resources–Education, Livelihood, and Safety and Environment.

i. Empowering the Youth through Education

a. Megawide Engineering Excellence Scholarship Program

The foundation partnered with Technological University of the

Philippines (TUP) Manila and the University of the Philippines Diliman

(UPD) to give scholarships to deserving Engineering students. The

scholarship covers tuition and school fees, monthly stipend, and book

allowance. 2016 was the first full operating year of the Scholarship

Program.

b. Megawide-TUP Center for Engineering Excellence Program

Aside from the scholarship program, the Foundation donated

specialized engineering reference books and materials to the TUP College

of Engineering to help the college obtain the Center of Excellence status

from the Commission on Higher Education. This donation benefited at

least 230 engineering students.

c. Aklat Para sa Lahat

Aklat Para sa Lahat is one of Megawide Foundation’s first

education projects, donating books and reading corners to day care and

public school classrooms around the country. In partnership with the

National Bookstore Foundation, the Department of Education, and

different local government units, Aklat Para Sa Lahat has already reached

NCR, Rizal, Bataan, Zambales, Subic, and Cebu.


68

ii. Providing Livelihood Communities

a. Organic Farming Project in Silay, Negros Occidental

In partnership with Harbest Agribusiness Corporation, 20

housewives in a sugarcane farming community attended a 6-week training

course on growing and harvesting high-value crops as an alternative

source of income.

b. Cebu City Operation Second Chances Livelihood Training

Programs

To maximize construction capabilities and industry connections, the

Foundation worked with the Philippine Contractors Association – Cebu to

conduct skills development training for juvenile delinquent undergoing

reformation in the Operation Second Chance Center. Megawide

Construction, tool suppliers, and material contractors also donated

carpentry and construction tools for the training.

iii. Providing a Healthy and Safe Environment

a. Megawide Building Green for the Marikina Watershed Project

In 2016, Megawide foundation began its 3-year rehabilitation project

in Marikina Watershed in Antipolo, Rizal. In partnership with the Philippine

Business for Social Progress, Megawide employees volunteered for a tree

planting activity in the first 3 hectares of the reforestation site.

b. Surigao Mangrove Tree-Planting Activity - Earth Day 2016

In celebration of Earth Day 2016, Foundation volunteers, officials of

the Department of Environment and Natural Resources, and alumni and

staff members of St. Paul College-Surigao planted 5,000 mangrove

propagules in Surigao City


69

c. Megawide-Citicore Power Operation Tuli

Megawide Foundation’s Safety and Environment pillar also takes

into account the well-being of its stakeholders. In order to encourage

proper hygiene and the well-being of male children in Mariveles, Bataan,

the Foundation provided free circumcision for 150 boys with the help of

medical volunteers and the Next Generation Power Technology Corp.

iv. Going Beyond the Pillars

Megawide Foundation goes the extra mile to realize its vision to

become an agent of transformation, through partnerships with different

sectors and organizations that share its advocacies.

a. Rehabilitation of Hospicio de San Jose Dormitory

Megawide Foundation voluntarily rehabilitated a dormitory building

that served as quarters for more than 150 children in Hospicio de San

Jose after it caught fire in August 2016.

b. Christmas Thanksgiving Outreach

With Christmas as the time of generosity and thanksgiving, the

Foundation hosted a dinner party for more than 50 Megawide utility and

security personnel in recognition of their contributions to the entire

Megawide organization.

c. Changing for the Better

To extend greater support in different areas, and achieve its goals in

the coming years, Megawide Foundation has made important changes in

the organization. In July 2016, the Employee Volunteerism Policy was

launched to actively engage more employees in Foundation programs.

The Foundation Program Approval Policy was also implemented to


70

streamline the evaluation of projects from external partners, partnerships

for existing projects, and the granting of donations

  POLICY ACTIVITY

The company implements Conducts site visits to perform


Customers’ welfare strict quality assurance and audit on the accomplishments
quality controls. and quality output of each site.

At least three suppliers are


required to submit their bid
The company has a
Supplier/contractor proposals for review and
supplier accreditation policy
selection practice evaluation, and a
in place.
recommendation is submitted
for consideration.
ISO 14001:2004
Environmental
Environmentally The company is ISO 14001
Management System
friendly value-chain compliant.
Standards
LEED Cerification
Initiatives undertaken by
the company include
Community interaction
rehabilitation of Dormitory
Megawide Corporate Library upgrade of TUP
at the Hospicio de San
Foundation, Inc.
Jose, Organic Farming in
Silay,
Violations or suspected
The company does not violation of company policies
Anti-corruption condone any dishonest, can be brought to the attention
programmes and unethical, or unprofessional of any of the following: Head
procedures behavior regardless of his of Human Resources
level of authority. Department , Compliance
officer , Head of Audit Group
All obligations are settled
The company manages its
Safeguarding creditors’ promptly as part of the
cash flow to meet its
rights company’s commitment to its
obligations.
business partners
III. Analysis of the Implementation of Other Unique Programs of the Firm
71

Megawide Construction Corporation and Subsidiaries differentiated the firm by

establishing the Megawide Corporate Foundation, Inc. in 2012 with the vision to

become a leading agent of transformation. It continues to inspire people and

communities to practice excellence and innovation through its three pillars:

Education, Livelihood, and Safety & Environment. The foundation grants

scholarships to deserving students and have been supporting engineering

excellence through books and material donations.

Megawide encourages all of its employees to volunteer in green projects such

tree planting activities to help rehabilitate Marikina Watershed, mangrove planting in

Surigao City as part of the firm’s tree planting activity on the earth day in 2016.

Megawide has been an aid to humanity by voluntarily rehabilitating destroyed

facilities, an example of this was the free rehabilitation offered by Megawide

Foundation to a dormitory building that serves as the home of more than 150

children after it caught fire.

Megawide advocates for the recognition of efforts not just by the top level

management but also its employees especially the utility and security personnel of

the firm. The firm believed that recognizing one’s effort will help boost their

motivation and strive harder in life. Megawide had also implemented the “Foundation

Program Approval Policy” which seeks aid from its projects to grant more donations.

IV. Firms Response to Government Mandated Programs and Policies

 Republic Act No. 4566 Contractor’s Licensed Law

The law was enacted in 1965 to ensure for the safety of the public that

only qualified and reliable contractors are allowed to undertake construction in

the country, meaning those obtaining the Philippine Contractors Accreditation


72

Board (PCAB) License. The Philippines Construction Association (PCA Metro),

accredited by PCAB, believes that the lack of compliance in obtaining the

PCAB License creates a dangerous imbalance in the construction industry

affecting the credibility, legitimacy and competitiveness of the industry locally

and also globally. Therefore they do not hesitate to denounce publicly the

unlicensed companies. Furthermore, PCA Metro launched a campaign untitled

“Report an unlicensed contractor” to allow the public and fellow contractors to

anonymously provide details of unlicensed contractors for PCAB action.

All government approvals and permits issued by the appropriate

government agencies or bodies which are material and necessary to conduct

the business and operations of Megawide, were obtained by Megawide and

are in full force and effect. However, competing in an environment where not

all competitors are visible as it creates bias in the construction industry is

dangerous. With this law, Megawide Construction Corporation will be more

secured in the environment they are operating with as penalties are attributed

to non-compliance with this law. Being able to identify key players in the

industry especially the firm’s competitors will contribute in building the firms

strategic plans and growth.

 Republic Act No. 10963 the Tax Reform for Acceleration and Inclusion

- TRABAHO (TRAIN 2) Act.

The second package of the Comprehensive Tax Reform Package is

back in the spotlight after President Rodrigo Duterte urged its approval in his

third State of the Nation Address. One of the main features of the upcoming

tax reform package is the lowering of the corporate income tax (CIT). Despite
73

other contentious portions of Package 2, it is generally seen as a welcome

development. In Southeast Asia, the Philippines currently has the highest CIT

rate at 30 percent. TRAIN 2 seeks to lower such rate

TRAIN 2 or TRABAHO which refers to the second package of tax

reforms being pursued by the administration will be implemented by 2019.

This is highly favourable for Megawide Construction Corporation and

Subsidiaries since it indicates a future decrease in the tax expense and

therefore will lead to higher net profit. This law would not just benefit the firm

but all of the Filipinos since it is a great push against unemployment. If there is

an increase in the employment rate, families will have the capacity to sustain

for their needs and wage hikes will not be in great effect on its expenses.

Moreover, the firm will have more to contribute in terms of the funds in

corporate social responsibility.

 Build, Build, Build” (BBB) Program

According to BMI Research, infrastructure plan will generate significant

volumes of construction activity through and beyond 2022, the end of his

term. The construction industry is forecast to sustain its strength underpinned

by the growth of the economy and the push for infrastructures.

This infrastructure program will provide opportunities for construction

corporations like Megawide Construction Corporation to generate an increase

in its annual revenue. This will allow the company to attain higher profit

margins and strengthen its relationship with suppliers, construction partners

and technological advancements as the program entails foreign and local

construction firms to work together. If the industry will continue to strengthen

its position, opportunities for foreign investors will be available for Megawide.
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V. Researcher’s View/Analysis on the Prospect of the Firm’s Mandate

Megawide Construction corporation has shown growth in operations reflected

in the firm’s financial report. Revenues magnanimously increased brought by the

push of the government to strengthen infrastructures in the Philippines. However,

cost that are attributed in operations have also been increasing through the years.

The researchers suggest that the firm should exert more effort in reducing cost

attributed with its consolidated operations by sourcing high quality but low price

materials. Reducing cost will enable the income from operations cover expenses and

therefore will give way to higher net income .The Mega wide Foundation will have

more to offer in terms of their social corporate responsibility.