Outlier

By Mark T. Amoguis
Researcher
PROSPECTS OF SM Prime Holdings, Inc.’s reclamation projects in Manila Bay were dimmed by the government’s planned rehabilitation efforts there, making it the most actively traded issue on the market last week.
Data from the Philippine Stock Exchange showed a total of P3.917 billion worth of 103.030 million SM Prime shares having exchanged hands on the trading floor from Jan. 14-18.
Shares in SM Prime stood at P39.40 last Friday, up P1.10 or 2.9% from the P38.30 close the previous day.
On a week-on-week basis, the stock inched up by 1% from its Jan. 11 close. It climbed 6.5% for the year.
“The sharp decline in [SM Prime’s] price last Wednesday was a dramatic reaction to the DENR’s (Department of Environment and Natural Resources) planned rehabilitation of Manila Bay, which investors believe, will conflict with the plans of [SM Prime] to reclaim around 600 hectares in the vicinity (Pasay/Parañaque),” said Manuel Antonio G. Lisbona, PNB Securities, Inc. president.
The DENR announced last Tuesday it will unveil its P43-billion Manila Bay rehabilitation plan on Jan. 27, as well as the list of establishments initially found to be non-compliant with the Philippine Clean Water Act of 2004.
Meanwhile, the Department of Interior and Local Government said that reclamation projects in Manila Bay should be shelved for the planned rehabilitation to succeed.
The day after the announcement, many investors took profits on the stock with a total of P1.626 billion worth of SM Prime shares having been traded that day. This sent the stock’s price to as low as P36 per share from its opening day price of P39.60 apiece. Some traders then took positions, bringing the price up to P37 per share by the day’s end.
To recall, the cities of Pasay and Parañaque both awarded in 2013 and 2014, respectively, to SM Prime separate contracts to reclaim and develop about 300 hectares each in Manila Bay for P54.5 billion and P50.19 billion.
About P100 billion will be spent for the reclamation and development of the two parcels of land.
Moreover, three major reclamation projects were green-lit by the cities of Manila and Pasay in October last year, namely: Manila Goldcoast Development Corp.’s 148-hectare Solar City; SM Prime’s 360-hectare project; and Pasay Harbor City consortium’s 265-hectare development.
Asked on how the planned Manila Bay rehabilitation will affect the prospects of SM Prime, Regina Capital Development Corp. Managing Director Luis A. Limlingan said: “It’s not so much the rehabilitation efforts, but more of whether the plans would be put on hold because of different interest groups.”
“The outcome will really depend on the extent of the conflict between the plans of DENR and [SM Prime],” PNB Securities’ Mr. Lisbona said.
“However, we believe that [SM Prime’s] management has already prepared alternative courses of action considering the issue (cleanup and rehabilitation of Manila Bay) is not a new one,” Mr. Lisbona added.
The property holding firm of the Sy family posted a P6.817-billion net income attributable to equity holders in the three months ending in September, up by 20.4% from the P5.660 billion recorded in the same comparative period in 2017.
This brought the nine-month net income to P23.439 billion, which rose by 16.9% from the previous year.
“Our latest forecast net income for 2018 is P30.7 billion and was driven [from] a mix of growth in mall revenues, rental income, and sales from their condominium development (via SM Development Corp.),” Mr. Lisbona of PNB Securities said.
He projects SM Prime’s profit at P36.8 billion this year.
Meanwhile, Regina Capital’s Mr. Limlingan sees a P32.6-billion net income for SM Prime in 2018 and P36.2 billion for 2019.
For this week’s trading, PNB Securities’ Mr. Lisbona pegged SM Prime’s support prices at P37 and P36, while resistance prices “seem to be strong” at P39.60 to P39.75.
For his part, Regina Capital’s Mr. Limlingan gave a support price of P37 followed by P36, while the resistance price is at P39.80.

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