Megaworld Maintains Healthy Loan Level

April 20, 1999 PSE CIRCULAR FOR BROKERS NO. 805-99 Megaworld Maintains Healthy Loan Level Megaworld Properties & Holdings, Inc. recorded bank loans amounting to only P1.14 billion as of end-1998, compared to its total equity of P17.4 billion for the same period. Subsidiaries incurred bank loans of P2.97 billion. The relatively low level of bank loans is aligned with the healthy net debt to total equity of 0.239:1 registered by the company and its subsidiaries in 1998. Megaworld Treasurer Francis C. Canuto noted that most of the company's loan obligations to banks are payable in the long-term and will in no way hamper cash flow, allowing the company to carry out its main thrust of fast tracking the completion of existing projects. LLphil "At the moment. our debt level is comfortable and manageable as can be and we enjoy the understanding and support of our creditor-banks." Canuto said. "But at the same time, we see no reason for further borrowings now in view of our lower capital expenditure in 1999, our strategy to diversify income sources and our access to other cash generation measures." He added that a measure of the company's success prioritizing project completion is the almost P1 billion decrease in the company's reserve for property development to P2.06 billion by end-1998 from P3 billion the previous year The reserve, an amount set aside for completing sold projects, correspondingly drops as more projects reach completion. It is computed as part of the company's total liabilities, along with deferred gross profit, in keeping with the company's conservative accounting practice of recognizing income based on the percentage of project completion. aisadc "Major items that appear as liabilities in our balance sheet, like the reserve for property development and deferred gross profit, are not at all borrowings but are merely provisions required by the industry-standard accounting method we are using," Canuto explains. The company expects a further decline in its reserve for property, development this years with the completion of more projects in 1999. These projects include the 8 Wack Wack Road residential tower in Mandaluyong, the land development for the Corinthian Hills residential/commercial subdivision lots in Quezon City and various high-rise and horizontal developments of housing subsidiary Empire East Land Holdings, Inc. in Metro Manila and the Calabarzon. cdlex In a statement to the Securities and Exchange Commission the company disclosed lower earnings for the year 1998 compared with 1997 but significantly increased both its total assets and equity. Total assets rose by 14 percent to P32.57 billion from P28.67 billion in 19997. The P17.4 billion in total equity is 24 percent increase from 1997's P14.09 billion.