SM Prime allots P80B for capex

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SM Prime Holdings President Jeffrey C. Lim said the company wants to take advantage of the fast-growing provincial areas in the Philippines. — ARRA B. FRANCIA

By Arra B. Francia, Reporter

SM Prime Holdings, Inc. (SMPH) said on Tuesday it earmarked P80 billion for capital spending in 2018, as it focuses on provincial areas with high-growth potential.

The property business of country’s richest man Henry Sy, Sr. had spent a capex of around P50-55 billion in 2017. Of this, SM Prime Chief Finance Officer John Nai Peng C. Ong said 70% was dedicated to the development of properties, while the remaining 30% went for the purchase of more land.

This year, the company seeks to hike the ratio of spending for land banking as it looks for more opportunities to further grow the business.

“We’re looking at around 40% for land banking in the Philippines,” Mr. Ong told reporters on the sidelines of a media briefing after the company’s annual shareholders’ meeting on Tuesday.

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The increased spending for land acquisitions is in line with the company’s push toward the provinces. In 2017, the company’s provincial malls accounted for 51% of revenues versus their 45% contribution the year before.

“We want to take advantage of the fast-growing provincial areas in the Philippines with increasing urbanization and commercialization stemming not only from robust domestic demand but also from increasing investments in the country,” SMPH President Jeffrey C. Lim said in a statement.

With this, the six malls the company plans to open this year are all located in the provinces. This includes SM Center Imus in Cavite, SM City Urdaneta Central in Pangasinan, SM City Legazpi in Albay, SM City Ormoc, and SM City Dagupan.

The mall openings will bring SM Prime’s combined gross floor area to 9.7 million square meters in 2018, across 73 malls in the Philippines and seven in China.

SM Prime will also be launching 15,000 residential units through SM Development Corp. (SMDC) this year. This indicates a sales value of around P45 billion, based on the average price of SMDC units of P3 million each.

SM Prime Chairman Henry T. Sy, Jr. noted that the company would like to leverage on the number of Mainland Chinese buyers snapping up condominium units in the country.

“There’s a very big influx of Chinese buyers right now and we’re hoping to capitalize on it, especially we have a lot of land banking that is good for all these buyers too,” Mr. Sy said.

The company added that close to 30% of its reservation sales in the first quarter of 2018 came from Chinese buyers.

Asked on SM Prime’s expansion plans in China, Mr. Sy said that the company is still looking for more opportunities in the country as it only has one remaining land bank there.

“The opportunity in China is there, but the Philippines offers a better return to investments, so we might as well expand here more than China,” Mr. Sy said.

Meanwhile, Mr. Ong noted that the company may issue P10 billion in bonds this year, as this is the remaining amount from its shelf registration program at the Securities and Exchange Commission that will expire this year.

SM Prime is further eyeing a mid-teens growth in earnings for the first quarter of 2018. In 2017, the company booked an attributable profit of P27.6 billion, 16% higher than what it generated in the year before as revenues surged by 21% to P125.6 billion.

Shares in SM Prime went down by 2.11% or 70 centavos to close at P32.50 each at the stock exchange on Tuesday.

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