SM Prime Holdings Inc. will likely deliver income growth of 15 percent this year on the back of anticipated improvements in its leasing and residential businesses, Maybank Investment Banking Group said.
SM Prime's mall expansion program, healthy mall occupancy rates, and steady rental rate escalations remain the growth drivers for 2024 and 2025, Maybank said in a recent report.
The property developer is also forecast to expand its revenues by 14 percent and 12 percent for this year and next, respectively.
"[SM Prime's] 14 percent higher capex (capital expenditure) budget of P100 billion further supports our view of the company's growth prospects in [the] leasing and residential [businesses]," Maybank noted.
The Sy-led mall landlord opened its 86th shopping center in Caloocan City last Friday, and is planning to open three more in Cebu and the Ilocos Region within the year.
The mall expansion, Maybank said, aims to capitalize on growth in provincial areas "where mall density is significantly below that of Metro Manila."
Through its residential property development arm, SM Development Corp., the company also intends to beef up its portfolio with the planned launch of up to 10,000 residential units in 2024.
From 2024 to 2027, the property developer is expected to book a compound annual revenue growth of 10 percent, driven mainly by its Philippine malls amid rental escalations, better leasing occupancy levels, and improved gross floor area.
On the other hand, slow mall expansion, weaker demand in the middle-income housing segment, and execution risks on the Pasay reclamation project could temper SM Prime's growth, Maybank said.
SM Prime maintains that the 360-hectare Manila Bay reclamation project remains "on track" despite delays. It targets completion of the project by 2028.
The listed firm reported a consolidated net income of P10.5 billion in the first quarter of 2024, up 11 percent year on year, on the back of a 7 percent increase in revenues to P30.7 billion from P28.6 billion.
Operating income for the period was 6 percent higher at P14.7 billion from P13.8 billion.
The mall business grew by 7 percent to P18.2 billion during the quarter, accounting for the lion's share of total revenues at 59 percent.
The primary residential business, which contributed 28 percent to the topline, notched a 10-percent rise in revenues to P8.5 billion from P7.7 billion last year.
"We are encouraged [by] the performance of all our businesses this first quarter of 2024," SM Prime President Jeffrey Lim has said, adding that they were also "bullish" with regard to the mall business.
"For the residential business, our focus remains [on] addressing [the] housing backlog within the socialized and economic segments," Lim said.
SM Prime shares were unchanged on Monday at P29.20 apiece amid a 0.97-percent rise in the benchmark Philippine Stock Exchange index.
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