Megaworld Corporation (MEG) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to the 9 Months Financial and Operating Results Briefing of Megaworld Corporation for the year 2024. I am Benedict Pasia, and I will be your host for this session. Before anything else, I would like to welcome our distinguished panelists who are here to provide insights into the group's performance and answer your questions. So joining us today are Mr. Roland Tiongson, the First Vice President for Megaworld Premier Offices. Ms. Cleofe Albiso, the Managing Director for Megaworld Hotels & Resorts.

Good afternoon, everyone.

And Mr. Andy Dela Cruz, Investor Relations Officer for Megaworld, and who will be our presenter for today.

Good afternoon.

Before we proceed to the presentation, just a reminder to attendees[Operator Instructions] Without further ado, I will now turn the floor over to Andy for the presentation.

Thank you, Benedict. Hi, everyone, and good afternoon. Well, thank you for joining us for Megaworld's 9 months 2024 Results Briefing. Now I would like to start this briefing with an update on Megaworld's financial performance during the period. Looking into the first 9 months of 2024, Megaworld's revenue increased by 23% to PHP 59.8 billion, supported by robust growth in real estate sales, mall rental income and hotel revenues. Our office segment also grew healthily throughout the period and remaining a solid contributor to our overall performance. Our gross profit margin showed improvement, thanks to effective pricing strategies and diligent cost management. EBITDA for the first 9 months reached PHP 24.6 billion, reflecting a 17% year-on-year increase, while net income rose by 16% to PHP 15.7 billion sorry, PHP 13.7 billion. Focusing on third quarter numbers, revenues reached PHP 20.7 billion, up 25% year-on-year and 3% quarter-on-quarter. Costs and expenses rose mainly due to increased spending to support the growth in our operations and as we began work on several new township projects. Now net income for the quarter came in at PHP 5.9 billion, marking a 26% year-on-year increase. Looking at our adjusted income, which excludes the impact of foreign exchange adjustments, net income to parent in the first 9 months grew by 11%, while net income for the quarter declined by 10%, but only due to a high base in the third quarter of 2023, where we saw an unusually low income tax due to a transaction done last year. Now for the third quarter of the year, for context, we recorded some PHP 709 million in ForEx gains, bringing year-to-date ForEx adjustments to an unrealized loss of PHP 144 million. Now for the first 9 months of 2024, Megaworld achieved revenues of PHP 9.8 billion, again, up 30% year-on-year with real estate sales making up majority at 63% of total revenues. Office rentals contributed 16%, followed by malls at 7.6% and hotel operations at 6.1%. Now real estate sales surged 30%, again to PHP 37.9 billion, fueled by strong market demand and accelerated project completions. Office rentals rose 2% to PHP 9.6 billion, driven by stable occupancy levels, rent escalations and the addition of new operating assets, underscoring our resilience in a challenging market. Mall rentals also increased by double digits. That's by 16% to PHP 4.5 billion as an improved tenant mix and higher occupancy rates boosted foot traffic and tenant sales. Now hotel operations continued to grow the fastest, up 38% to PHP 3.6 billion as the resurgence in tourism and a really dynamic MIE sector bolstered both occupancy rates and event bookings. Now we continue to maintain a strong and healthy balance sheet. As of the end of the 9-month period, our gross debt stands at PHP 99.2 billion with 81% comprised of bank loans. Of our total debt, 64% is on a floating interest rate, while 36% is fixed that ensures flexibility in our financing. Our foreign currency exposure remains at 40%, amounting to approximately around $550 million of our gross debt. Our net debt-to-equity ratio is still at a solid 30%, among the lowest in the industry, which really reflects prudent financial management and stability. For the period, we allocated PHP 39 billion in CapEx with 92% directed towards project development and 8% for land acquisition, aligning with our strategic growth initiatives. Next, I would like to focus on operating updates during the first 9 months of the year. Now to start things off, being a township developer, we are also very happy to announce that we have achieved another milestone so far. Megaworld launched 2 tourism-related townships in the first 9 months of 2024, that's Lialto Beach and Golf Estates Indian, Batangas, which is a 150-hectare development designed for premier beach side in Golf Lifestyle living. The second one is San Benito Private Estate in Batangas, a 25-hectare active wellness community in partnership with a world-renowned the farm at San Benito. Now just recently, actually just within last month, we Megaworld launched another township further to the north with the launch of its 34th township Ilocandia Coastown. This is an 84-hectare integrated lifestyle community in Laoag Ilocos Norte. Now with this latest addition, Megaworld cements its position in 3 of the fastest-growing regions based on the latest data released by the PSA, which is Central Visayas, Western Visayas and the Ilocos region. Now as part of our commitment to sustainability and social responsibility, Megaworld has launched the good Food Farm initiative at McKinney Hill in partnership with Farm Top and Rice against Hungary Philippines. This 500 square meter hydroponic farm is designed to tackle food and security and support community resilience by producing fresh organic produce with minimal environmental impact. Now the farm's harvests are donated to RHPs nutrition programs in Barangay Ususan , the Gig and Tondo Manila, providing essential nourishment to at-risk individuals, including pregnant women, children and the elderly. Now through this initiative, we aim to foster healthier communities and contribute to food security in our local areas and townships. Now moving on to a per segment deep dive and to our Real Estate segment. Now this slide just underscores and shows the resilience of our gross profit margins in the real estate development, which has shown steady improvement over the past 5 years even amidst rising construction costs. For the first nine months of 2024, Megaworld achieved a 50% gross profit margin in real estate, making it one of our highest ever in GPMs. Now this margin is nearly 500 basis points above pre-pandemic levels, and 100 basis points higher year-over-year. Now consequently, our gross profit surged by 33% to PHP 18.9 billion, outpacing our revenue growth. Now, these results emphasize the effectiveness of our pricing strategies and disciplined cost management. Now our real estate sales mix highlights the continued strength of our upper middle to high-end projects, which makes up majority or 84% of total sales. This segment is primarily supported by our Megaworld and Global Estate brands. Meanwhile, our economic to mid-income category served by Empire East, Suntrust Properties and Stanley brands contributes the remaining 60% of sales. In terms of location, Metro Manila accounted for 58% of sales, while the remaining 42% coming from provincial areas, really showcasing our expanding footprint across the country. Now by classification, vertical developments continue to be the largest chunk, representing 79% of our sales, while horizontal developments contribute the remaining 21%. Now, strong demand for our real estate projects has been sustained through the first nine months of 2024 with Megaworld booking PHP 102.4 billion in reservation sales. Now this performance keeps us on track toward our PHP 145 billion target for the year. And this is really supported by solid interest in our residential developments in our projects in the Taguig, Cavite, Bulacan, Palawan, Bacolod, Boracay, among others. Now while local demand remains robust, our international sales remain a strong contributor, accounting for 24% of reservation sales. Our international sales offices continue to drive this growth by reaching overseas Filipino professionals and workers while our local team effectively caps end users and investors seeking new homes and investments locally. Now by location, Metro Manila projects accounted for 61% of presales with provincial areas contributing to around 39% sorry, that 60% and 40% for provincial areas, showcasing balanced demand across key regions, and highlights our expansion into provincial areas. Now vertical developments remain the dominant component, representing 83% of presales with horizontal developments making up the remaining 17%. Our unsold inventory as of the end of the period is approximately 12 months' worth of inventory based on the current demand levels. Our unbooked reservation sales amounts to PHP 136 billion, positioning us well for continued sales growth in the future. In the first nine months of 2024, we actually launched projects totaling PHP 25.4 billion, putting us well on track and hoping to reach our PHP 40 billion target for the year. By location, approximately 65% of the value of our launches was in provincial areas, while the remaining 35% is in Metro Manila. In terms of project type, vertical developments still dominated, comprising 90% of the launches, while the horizontal developments made up the remaining 10%. Now these launches continue to reflect our focus on meeting market demand across both Metro Manila and key provincial areas and with a strong emphasis on vertical developments to optimize really urban spaces in our integrated townships. Now the first project we launched this quarter, one of the projects we launched this quarter that we'd like to highlight is the Auto Beach and Golf Estates. This is located in Lian, Batangas. This is Phase 2 of our exclusive beach and golf estate development, featuring a sellable area of over 33,000 square meters with 57 units with an average selling price of PHP 31,000 per square meter. Now the project aims to deliver a premium lifestyle experience, which is beach side and golf living. Now, Lialutto is targeted to open in 2028 and is currently 9% sold this second phase. Now another exciting project we'd like to highlight is Ocean Suites at Boracay Newcoast in Boracay Island. This development features Tower 1 with a sellable area of over 4,000 square meters, offering around 81 Suites is set to deliver a premium beachfront experience. And this is targeted to open in 2029, and this project has already seen a lot of strong interest with 49% of the units already sold. Next, I would like to move on to Megaworld Premier Offices. Now our office rental income remained resilient amid industry headwinds, reaching PHP 9.6 billion for the first nine months of 2024. This is a 2% growth compared to last year. And in the third quarter alone, office revenues grew by 6%, thanks to the successful turnover of the International Finance Center. Now this stability underscores the strength of our tenant base and our continued focus on high occupancy levels. Now as of the end of the period, our overall occupancy rate stands at a steady 87%, reflecting solid demand across our office properties. Now our weighted average lease expiry remains robust at over 3 years, which aligns well with our typical 5-year lease agreements, providing strong income visibility in the years to come. Now our tenant mix is comprised still largely of high-quality tenants with 72% of our leased space occupied by BPOs and 24% by traditional office tenants. Shared services and POGO each account for only 2% of our occupancy, underscoring really our strategic focus on focusing on sustainable and resilient sectors. Now Megaworld Premier Offices recorded 321,800 square meters of transactions in the first 9 months of 2024, really reflecting strong demand. And this total includes over 90,000 square meters of new leases, which highlights our ability to capture approximately at least around 10% of the market share for new lease transactions in the industry so far. Now our renewal rate for the period stands at a very strong 82% consistent or above industry average, while our overall occupancy rate remains at 87%, as mentioned, which is well above the industry's 82% to 83% range. Now the sustained high occupancy rate reflects the premium quality and strategic locations of our office assets as well as our strong tenant relationships. Next, I would like to discuss updates on Megaworld Lifestyle Malls. For our malls, rental income rose by 16% year-over-year to PHP 4.5 billion, driven by higher consumer spending, increased foot traffic and strong operational occupancy. This slide showcases the steady recovery of our mall business with revenues approaching pre-pandemic levels already. Now our occupancy rate stands at 93%, which is the highest we have seen for our Megaworld lifestyle malls, which reflects robust tenant demand and successful leasing strategies of our malls team. Retail performance has also continued to strengthen in the first 9 months of 2024. Total tenant sales grew by 10% year-on-year, supported by a 17% increase in average daily foot traffic, which reached 245,000 visitors a day in this period. Now average daily spend also rose to PHP 600, a 9% improvement year-on-year, more than 40% higher than pre-pandemic levels in 2019. This boost in sales and foot traffic, combined with an occupancy rate of 93% has driven strong results for our malls division. Now looking ahead, we aim to further increase operational occupancy, which will, in turn, support growth in mall rental income in the years to come. Now in the first 9 months of 2024, we welcome new partners across more than 30,000 square meters of mall space. Notable additions include; Repertory Philippines there in Eastwood City, which occupies over 1,000 square meters, and that also enhances our cultural and entertainment offerings for our malls. We also opened one of a large Starbucks outlet in Maple Grove, covering over 1,500 square meters to provide an elevated cafe experience for our patrons in the township. Now these new partnerships reflect our commitment to really diversify our tenant mix and enhance the shopping experience across our developments. Now we're also really excited to announce the official opening of Tesla Philippines showroom and service center at Uptown Bonifacio just this morning, today, November 8, complete with dedicated charge stations. Now this launch makes the Philippines the fourth country in Southeast Asia to host the iconic electric vehicle brand, marking a significant milestone in the country's EV landscape and sustainability. Moreover, Tesla plans to exclusively install charging stations across Megaworld's townships, specifically our lifestyle malls. Now this further really expands the electric vehicle infrastructure, and it also supports our commitment to sustainable development while bringing foot traffic to our malls and township. Megaworld Lifestyle Malls also had this project in collaboration with sustainability advocate, Catriona Gray has introduced the Enviro Chic Bag collection, a stylish eco-friendly line crafted from up-cycled tarpaulins. Now this collection includes 3 unique bags, the versatile large tote, the 3-Way Folio and the Essentials Bucket. Essentially, each bag is meticulously handcrafted by Filipino artisans, making each piece unique and while supporting local communities. The collection is exclusively available through a redemption program at select Megaworld malls, where customers can exchange receipts and pet bottles, promoting a circular economy and encouraging eco-conscious shopping. Now I would like to discuss the performance of our Megaworld Hotels & Resorts. Our hotel segment achieved an impressive growth with revenues reaching PHP 3.6 billion for the first 9 months of the year, marking a 38% increase year-on-year. Now still the fastest among our business segment. Now this strong performance is attributed to an occupancy rate of 72% and an improved average daily rate of MXN 2,900, driven by rising demand in MICE activities and increased tourism activities. Now our hotel EBITDA margin stands at 14.3%, reflecting higher operational costs, including manpower to expanded our operations to meet the increasing demand and as we ramped up activities for a lot of our hotels. Now Boracay Newcoast has proudly introduced Marhaba Boracay, dedicated beach cove within its 150-hectare development, really designed to specifically for Muslim travelers and tourists. In collaboration with the DOT, the local government of Malay, Aklan and key Halal Tourism stakeholders, this initiative establishes a Muslim-friendly beach experience that adheres to Islamic guidelines. So accommodations in the township include Muslim-friendly rooms equipped with prayer mats, qibla, Qurans and information on nearby Halal Restaurants and Mosques. Now additionally, Halal Certified cuisine is available at Megaworld Hotels and Resorts properties, really enhancing Boracay Newcoast experience for Muslim guests and are supporting our commitment to inclusive and accessible tourism. Now moving on with the presentation, I would like to discuss the various targets and goals we have for the rest of the year. We are sustaining our PHP 55 billion CapEx budget for 2024 with 80% allocated towards project development and the remaining 20% earmarked for strategic land acquisitions. As of the first 9 months of 2024, we have utilized approximately 71% of our total CapEx budget, aligning well with our planned investments in expanding and enhancing our project portfolio. Megaworld also remains on track. Next slide, please. to reach its target of 35 townships by the end of 2024, starting from just 31 townships by the end of 2023, we've already expanded to 34 townships with notable additions this year, including the Ata Beach, Gulf Estates, San Binida Private States and Ilokano Costown. Each of these townships brings unique world-class amenities that really align our vision to create master planned townships with one more township set for launch during the fourth quarter of this year, we are excited to further extend our footprint and deliver exceptional life experiences across the country. Next slide, please. Our reservation sales target for the year is PHP 145 billion. We are 71% of this figure, and we are working hard to finish the year strong and reach our target. our launch target is at PHP 40 billion, which includes some Metro Manila projects. As we have always been flexible to supply and demand situations in the market, we are closely monitoring our launches for the rest of the year and hope to reach PHP 40 billion if demand allows. Now as part of our strategic growth, we aim to expand our office portfolio by an additional 148,000 square meters of gross leasable area by 2026. So that marks a 10% increase. These upcoming developments will be located across 5 of our premier townships, all outside Metro Manila, underscoring our commitment to broadening our presence in key provincial growth areas and where office is facing more tailwinds. Now this pipeline highlights our dedication to meeting the evolving demands of businesses while still fostering economic growth in these regions. Now looking ahead, we also plan to expand our mall portfolio by over 150,000 square meters of GLA by 2026. This represents around a 30% increase from our current GLA. A significant portion of this pipeline will be realized in '25 and 2026 with key projects such as Boracay Newcoast Beach Walk, the Capital Mall in Capital Town Banga and Highland Mall and Park in Highland City, Genta. These additions will enhance our retail offerings and really strengthen Megaworld's presence in these locations. Now for our Hotels and Resorts division, we are set to add over 3,100 new room keys across various strategic locations by 2029, Key projects include the Chancellor Hotel Boracay in Aklan, continued room openings of Grand Westside Hotel in Parana City and the upcoming Paragua Sands Hotel in Palawan. Now this pipeline really reflects our commitment to expanding our presence in key tourism and business hubs, catering to the growing demand for high-quality accommodations in these areas. Finally, just I would like to end with the following key takeaways from this call. Real estate, sequential growth in bookings remains robust with sustained strong demand across both provincial and Metro Manila projects. We are confident that this momentum can carry through towards the end of the year. Offices, despite a challenging market landscape, our high tenant retention and ongoing rent escalators continue to drive steady growth. We anticipate strong renewals of expiring contracts and an uptick in demand for both the growing BPO and traditional sector. Now lifestyle malls, rental income has surged, fueled by higher tenant sales, increased foot traffic and elevated operational occupancy. We aim to maintain this positive rental income trajectory throughout the year. For hotels, revenues have surpassed or surpassed pre-pandemic levels, spurred by a significant rise in domestic tourism and MICE activities. Looking ahead, we hope to continue the growth bolstered by rising international tourist arrivals and of course, additional room openings from our pipeline. That's the end, that's the last slide of my presentation. Now I would like to turn over the floor to Benedict, who will now open the floor for questions. Thank you.

Thank you, sir, Andy, for that very comprehensive presentation. As we move forward, it is now time to open the floor for questions. [Operator Instructions] There's a question here from [ Yvonne Toe ].

I think we're not hearing anything.

So while waiting for [ Yvonne ].

Can you hear me now? Okay. Great. Sorry about that. So my first question is on presales. Previously, you mentioned that a lot of your launches are back-end weighted, and so we would expect presales to pick up. Could you maybe share a little bit more color on what happened in 3Q? Because it seems like while your target is INR 345 billion for the full year, which is about 71% right now you mentioned. What led to the slight below expectation presales in 3Q?

Thank you, [ Yvonne ]. So we actually saw some improvement in our presales numbers in 3Q already. We've presales for the third quarter is almost PHP 34 billion, which is about 6% growth sequentially compared to second quarter of the year and also a 2% growth compared to last year. I think the largest reason for why it may appear that we are still lagging behind our target is that we have not launched a lot of projects during the third quarter of this year. Actually, we just launched around just PHP 2 billion worth of projects during the third quarter. And we hope that come fourth quarter, we can launch more. We can also hope to expect that the lower interest rates policy rate cuts could help spur market demand for residential properties. I think that's also one of the key factors that we have seen during the third quarter is that the buyers have been at least waiting out the rate cuts to kick in, into the mortgage rates. Also in the third quarter of 2024, if you did notice our foreign sales as a percent of our international as percent of our reservation sales dipped a bit to 24% of total reservation sales that came from around 26% during the first half. So that would mean third quarter, our reservation sales mix for foreign clients is at around 22%. And the largest reason for this is the dollar weakened during the third quarter of the year and a large portion of our buyers are really OFWs, overseas Filipino workers professionals. and that reduced spending probably affected their capacity to or their demand capacity for our projects this third quarter. Now we hope fourth quarter, again, the dollar has strengthened again. That could mean a meaningful pickup as well for our international sales.

In the previous call, you mentioned that cancellation rates was around pre-COVID levels at about 5%. Is that still the same?

Yes, that should be still the same.

Okay. Right. And based on your explanation before, so the presales, you feel like it's lagging behind not because due to a lack of demand, but rather because your launches were not as strong. Is that correct?

That's correct. for this quarter. But on the demand for international, that might have some impact as well as we saw lower international sales, which we actually expect it to continue to grow or at least contribute the same this third quarter.

Okay. On unsold inventory, previously, you mentioned you have about PHP 145 billion on unsold inventory, and you were looking to lower this to maintain around 12 months' worth. Where are we on that? Could you be able to share a bit more?

Our unsold inventory as of the end of 9 months is at PHP 135 billion. So approximately a little bit below 12 months, 11.9 months' worth of inventory based on current demand.

Right. Would you be able to share the split between those in Metro Manila and those outside Metro Manila?

We can't send over the split I do have that split. By Metro Manila, we have more than 30% in Metro Manila, while the rest would be in provincial areas.

Right. And do you have the percentage for RFOs as well?

RF is at 25% to 26%.

Right. So we heard that there's quite a lot of discounts going on for the unsold inventory, like the RFO market. Are you also seeing the same? Are you facing any difficulties in reducing this? If you could add more color on that, that would be super helpful.

Sure, [ Yvonne ]. We also did our round of discounts for RFOs, but that's largely due to I think that's largely due to our celebration. I think we've had a lot of promos in line with the 35th year anniversary of Megaworld. So we have cash discounts, and discounts for those that acquire properties in preselling terms are very, very minimal, less than 10%. For cash discounts, it could be more substantial. So it was quite, for our experience for RFOs, it was quite easier to sell out RFOs because we've seen a trend where buyers right now, at least during the first 9 months of the year, when we were, again, we began the year with over 40% of our inventory in RFOs. Now we're at about 1/4 of our inventory in RFOs. So we've made a lot of ground in reducing our RFO levels, and that's really due to the trend of buyers wanting to buy projects that they can already immediately live in, so mostly end users. And this also helped us because when we sell RFO projects, these projects have already enjoyed 5 years' worth of price increases. So even then, even with the discounts that is happening in the market, at least for us, even with those discounts, we're still selling above the preselling price. So that still bodes well for our margins. Hence, our margins have been picking up.

Just a housekeeping question. Could you share what's your unbooked revenue levels?

Unbooked revenues is at PHP 136 billion as of the end 3Q.

Okay. Just one final question for me. Earlier, you mentioned that residential revenue picked up a lot because of pricing strategy and effective cost control. Could you expand more on this point?

So pricing strategy, the point I was trying to make there is, again, we sold a lot of RFOs as well during the year. And with this pricing strategy of increase of holding. So actually, what we did, when we launch a project, typically, if construction costs start to rise while we're constructing we will hold out some of the RFO units to be sold after the project has been completed so that we can enjoy a lot of price increases that come from yearly, annual increases or the launch of a second tower in nearby area. So that would effectively increase the prices of these RFOs that we sell and really help our margins. Now for demand, yes, it's also on demand for RFOs, which really helped. Because if we sell RFOs, real estate sales that would be booked immediately 100% upon receipt of equity. While if we do sell a preselling condominium or develop any development, it would be in step with percent of completion. So the revenue bookings for real estate sales would be delayed.

We also have here a question from Jelline.

This is Jelline from JPMorgan. My first question is on Uptown Modern. Can you update us on the presales level of this project?

Uptown Modern is 72% sold as of the end of 9 months.

Next would be the on the office. Can you comment more about how the industry or at least how rental rates have trended so far in relation to the POGO. Some of the projects already in amid the POGO ban by year-end? Can you comment also on your outlook on rental reversion trends in the three locations that you are present in Metro?

Hi Jelline, I'll take that question. And thank you for that. Well, for the POGO, most of the movements happened in October. So for the third quarter, there wasn't much impact on rental. But I heard in locations where there's heavy concentration of POGO, rates have come down in October. So market-wide, the impact is not really widespread. It's more concentrated in the locations where the POGO used to be located or are located.

The half is more the number of square meters or the rent?

Can you repeat that?

Sir Roland, you mentioned half movement in October. Are you referring to rental rates per square meter or the number of square meters by the existing POGOs?

Both actually. So a lot of POGOs have vacated in October, and it has affected also the downward movement of the rates in those locations, mostly in the Manila area.

So 50% discount on rates?

No, not 50%, I don't think so. Just a slight movement actually. I don't know about the particular buildings if there were 50% discounts. I haven't heard of any in particular. I'm just I'm more aware of what's happening in the general areas.

Understood. And for your remaining 2% POGO tenancy, are they on track to close shop within the year? And do you have visibility on potential replacement tenants willing to take over these spaces?

Well, in terms of whether they are leaving, the answer generally is yes, most of them at the very least. But we actually we're anticipating to replace them in the first quarter of next year. But actually, they left ahead of schedule. Some of them have already started leaving in October. So we're trying to catch up with that early withdrawal from the market.

Are there any more participants who would like to raise their hand? Please feel free to raise your hand so that we can address your questions. Yes, Carl, you may speak.

So I do want to ask a few questions regarding the Office division. So among them, you have a number of buildings upcoming until 2026. But let's say, for the ones coming up in fourth quarter until next year, what's the pre-leasing level like? Is any of the space released even?

Hi Carl. Yes, actually, we were able to pre-lease Bacolod 65% pre-leased already for Bacolod. For the other locations, not yet. We're anticipating to pre-lease Iloilo by this quarter. We still haven't finalized anything yet, but we have a lot of inquiries and active negotiations in that area.

Thank you, Carl for your question. There's also a question here for the hotel segment. So the hotel segment appears to have shown the strongest growth among the business segments of Megaworld. So to which factors do you attribute the very strong growth? And is the growth coming from the business hotels or destination hotels? Ms. Cleofe?

Thank you, Benny. Growth is coming from the resurgence of travel. We have also been very transparent about the increase of MICE with rooms and banquet requirements, a lot of conventions as well as summits were mounted by organizations and corporate accounts. So that's the bigger contributors for the growth in Q3. The split is between 58% and 42% between business and leisure, but we also have to note that we're coming from a low base for our destination markets like Boracay and Mactan. Even if they are destination areas, the majority is still business travels given accounts like Delta Air, layover flights. So corporate business travel is still the bigger share of the contributor. And we're happy that our destination markets are picking up slowly.

Thank you so much, Ms. Cleofe. Another question for the hotel segment. Since transitioning Boracay Newcoast into a Muslim friendly beach destination, what impact have we observed in its performance metrics? And are you looking to duplicate this format in other Megaworld hotels?

By the way, we're not really transitioning it. We're offering a space in one of the codes. I think that's the beauty of the townships that we have because we have really massive lands compared to the other resorts. So we're able to allocate Cove 3 dedicated to our Muslim friends. And the rest of the beach areas are dedicated to the rest of our guests. We have not been able to really get very big pickup, but I'm currently here in Boracay and the visibility of Muslim families is actually increasing. So that's very encouraging for us. In fact, one of their popular influencers are here Shaha Meta with about with about 0.8 million followers, including Facebook and TikTok. And this is a sign. Their interest is one that's very encouraging for us. We have had Halal certification for 2 of our restaurants already. So that's the Vienne restaurant here in Savoy Hotel Boracay as well as our Kingsford Hotel. But all our hotels are in the process of applying for Halal Kitchen and Halal Friendly restaurant certification. So we can expect that in the coming quarters, we will continue to achieve the certification so that we can focus on welcoming our Muslim friends all over the world.

Thank you so much, Ms. Cleofe for that. There is another question here from [ Yvonne ].

I just wanted to ask more questions on selling down the RFOs. Are you seeing a difference in demand or efforts to sell between the RFOs within Metro Manila and those outside Metro Manila? If you could share more on how is the situation like on the ground, that would be super helpful.

Thank you, [ Yvonne ]. I think it's largely the same, except that we have more inventory in terms of RFOs here in Metro Manila. So admittedly, a larger part of their work is focused on Metro Manila. So we have a team really dedicated to RFOs selling. So it's quite different from how we sell our preselling condominiums or projects. But essentially, it's largely the same for both provinces, for provinces and Metro Manila. But I think it would be much easier for us to sell in provincial areas given the lower price point as well as the less saturated residential market provincial areas. Hence, our focus to really expand in those areas for our new launches.

Right. What kind of discount like levels are we seeing in Metro Manila? How much discount are you giving compared to your peers and versus outside Metro Manila?

On a regular basis, I think the most discount that we give would be somewhere in the 5% to 10% range. We had this one-off promo during the year where we sold some of our residential projects, if bought by cash by around 20% discount. And I would think that would be a bit still lower and more prudent than compared to the industry's discounts. I think industry -- but I have seen some listings in the industry from different developers that could reach 40%, 50% discounts being offered already to their employees. So this is still much better in terms of that and still above the launch price that we initially set the average selling price of the building for.

Right. And this you're describing the situation in Metro Manila, am I right?

Yes.

Okay. And outside Metro Manila, I guess, it's not as aggressive?

Not as aggressive, yes. The cash discounts is only for Metro Manila projects. Typically, the higher value ones that would be tougher to move the luxury or high-end projects.

Okay. Got it. If I may just ask one question as well. So some of your peers have been raising reservation fees, pulling back on launches and all this to attract more quality buyers and to deal with the cancellations. Do you feel the need to do the same? Your cancellation rates at 5%. Do you think that your payment terms are tight enough? How do you read the situation right now?

I think that's a case of them having elevated cancellation rates. The industry have seen high cancellation rates because their reservation fees have been minimal and their payment terms have been very, very affordable for the buyers. In our case, we haven't raised our reservation fees. It's still the same at around PHP 50,000 or PHP 100,000 if you want to reserve a unit. But the key difference for us compared to other developers is we collect a larger portion in terms of payment terms during the first 5 years during construction. On average, it could be somewhere in the 50% to 60% range of the project value of the unit value that we will collect. And this we have seen time and time again that this has effectively already deterred those joint buyers because once they see the payment terms, once they see the commitment that they have to pay during the year, which typically is in the millions. We typically have lump sums every end of the year. We collect on average 10% to 12% a year. That's already enough for them to not purchase the unit. And our sales guys are really trained to inform them about this, this decision, this lump sum at the end of the year so that they are aware. But of course, this payment term is flexible. They can have the lump sum spread across the 12-month period. Still, that's still a more conservative approach to prepayment terms. I think other developers are just collecting 20%, 30% of the total unit project unit value over the 5-year term, where we're collecting a bit more.

Right. So just to confirm if I heard that right, it's 50% to 60% equity value, about 10% to 12% a year over 5 years.

That's right.

There's a question here from Charles Lumhod. Can you get more color on the exclusive partnership with Tesla in installing charging stations within Megaworld's Mall? Andy?

Sure. Thank you for your question, Charles. So the partnership or the launch of Tesla's flagship store and showroom in Uptown Bonifacio is actually a significant milestone for us. We anticipate positive impact on both foot traffic and sales not only in Uptown Mall, but across our lifestyle malls in the Philippines. So the agreement or at least what we have is an exclusive -- they will place their superchargers exclusively in Megaworld Lifestyle Malls. So currently, they are already equipping Uptown Mall B2 with a few superchargers. And in the next few months or years yes, in years, it would spread out across township developments of Megaworld, mostly in mall parkings. So that is the agreement that we have.

So it seems that we are rapidly approaching the end of our allotted time for today's call. So as we conclude this session, we would like to express our heartfelt gratitude to everyone for joining. If you have any questions that we were unable to address during this session, send them to us via email. And we look forward to engaging with you all again in the near future. Thank you for your participation, and stay safe, everyone. Enjoy the rest of the day.