The real estate investment trust’s revenue grew fast enough to absorb nearly one billion new shares issued for Megaworld properties, but a sharp rise in receivables weakened cash conversion.
MREIT entered 2026 with a familiar promise for investors in real estate investment trusts: Get bigger without leaving existing shareholders behind.
For the first six months of the year, it largely delivered on the first part.
Revenue rose 26.3 percent to ₱3.41 billion, while net income climbed 31.1 percent to ₱2.53 billion. The gains followed the addition of nine office buildings in McKinley Hill, Taguig, transferred by MREIT’s parent company, Megaworld, in exchange for nearly one billion new shares.
The transaction increased MREIT’s outstanding shares by 26.8 percent. Revenue grew at almost precisely the same rate, allowing the company to avoid meaningful earnings dilution. Basic earnings per share rose to ₱0.54 from ₱0.52, a gain of 3.8 percent, rather than declining under the weight of the new shares.
That amounted to a narrow but important victory for existing shareholders. The company’s revenue expanded fast enough to absorb the enlarged share count, while stronger margins produced a modest increase in earnings per share.
But another measure of performance told a less reassuring story.
MREIT generated ₱1.50 billion in net cash from operating activities during the first half, down 14.6 percent from ₱1.76 billion a year earlier. That decline came even as reported net income increased by nearly one-third. Operating cash flow covered only about 59 percent of net income, compared with roughly 91 percent in the same period last year.
The principal cause was a ₱1.674 billion increase in trade and other receivables. Thus, a significant portion of reported earnings had not yet converted into cash by June 30.
Growth on the income statement
On the surface, MREIT’s operating results were strong.
Rental income increased 28.8 percent to ₱2.63 billion, and income from dues rose 18.6 percent to ₱780 million. Costs grew more slowly than revenue, lifting the gross margin to 82.9 percent from 81.1 percent. Operating profit advanced 28.2 percent to ₱2.78 billion.
The earnings were also largely recurring. MREIT recorded no fair-value gain on its investment properties during the period, meaning the rise in net income did not depend on revaluing buildings upward. Most of the company’s profit came from rent, dues and ordinary property operations.
Distributable income, the measure most closely connected to a REIT’s capacity to pay dividends, increased 33.7 percent to about ₱2.49 billion. MREIT declared dividends of ₱0.263 per share for each of the first two quarters, giving shareholders ₱0.526 per share for the first half.
By those measures, the property-for-share transaction was modestly accretive. Revenue growth kept pace with dilution, and better margins allowed earnings and dividends per share to move slightly higher.
Still, revenue per share was effectively flat. The company became much larger, but the economic improvement attributable to each share was considerably smaller than the headline growth rates suggested.
The cash-flow gap
The more difficult question is how much of MREIT’s reported income became available in cash.
Trade and other receivables reached ₱2.59 billion at the end of June, up from ₱916.6 million at the end of December. That was an increase of 183 percent in six months, far exceeding the company’s 26.3 percent revenue growth.
Management attributed the increase to higher billed receivables and timing differences among billing, revenue recognition and collections. The expansion of MREIT’s portfolio almost certainly contributed, since the company added nine income-producing buildings and began recognizing their income from Jan. 1.
But the scale of the increase makes it difficult to dismiss as a routine quarter-end timing issue.
Of the ₱2.59 billion total, about ₱982.6 million represented trade receivables, principally amounts associated with tenants. The remaining ₱1.61 billion was classified as other receivables, which the financial statements described as mainly advances to building administrations and fit-out allowances. All of that other-receivable balance was presented as current or not yet due.
The filing did not provide a detailed reconciliation identifying the counterparties, contractual settlement dates, or the portion directly associated with the property transfer. That leaves investors unable to determine how much of the increase reflects temporary acquisition settlements and how much represents a more persistent use of working capital.
The trade-receivable aging also contained signs that collections were not uniformly prompt. About ₱351 million, or nearly 36 percent of trade receivables, was past due. Approximately ₱159 million had been outstanding for more than 120 days. MREIT recorded no impairment charge, saying the balances remained collectible and were supported by advance rentals and tenant security deposits.
That provides some protection against ultimate losses. It does not, however, convert the balances into cash available for dividends.
Dividends running ahead of cash generation
The distinction matters because MREIT declared ₱2.17 billion in dividends during the half while generating ₱1.50 billion of operating cash flow. Cash and cash equivalents fell to ₱535 million from ₱1.39 billion at the end of 2025.
MREIT remains conservatively financed. Its interest-bearing loans stood at about ₱7.22 billion against ₱83.5 billion in equity, and its interest coverage ratio improved to 10.73 times. The company is not facing an immediate balance-sheet crisis.
But a REIT cannot indefinitely distribute accounting earnings that it has not collected. If receivables normalize in the second half, the first-half cash-flow weakness may prove temporary. If they remain elevated, the gap would suggest that reported distributable income overstates the cash being generated within the period.
That makes the next financial report unusually important. Investors will be watching whether the ₱1.61 billion of other receivables is settled, whether balances more than 120 days overdue decline, and whether operating cash flow begins to catch up with net income.
For now, MREIT can fairly claim that its expansion avoided earnings dilution. Revenue grew fast enough to match the new shares, and margins supplied a small amount of per-share accretion.
The company has not yet shown, however, that the full increase in earnings is arriving in cash.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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