SM Prime Holdings Inc. plans to issue P10 billion in fixed rate retail bonds to finance the expansion of mall and residential businesses.
SM Prime said in a filing with the Securities and Exchange Commission it would sell P10 billion worth of bonds, the fourth and final tranche from the P60-billion bond shelf registration it filed in 2016.
SM Prime has earmarked P80 billion in capital expenditures this year to support the company’s provincial expansion and land banking activities.
The company this year plans to open four new malls and complete the expansion of two.
The group’s residential business under SM Development Corp. also plans to launch between 15,000 and 18,000 residential units, including high-rise buildings, mid-rise buildings and single detached house and lot projects.
Meanwhile, SM Prime’s P10-billion bond offering received a rating of PRS Aaa from Philippine Ratings Services Corp. (Philratings). Obligations rated PRS Aaa are of the highest quality with minimal credit risk.
The SM Prime’s capacity to meet its financial commitment on the obligation was extremely strong, said PRS Aaa.
Philratings in assigning the rating considered several factors, including SM Prime’s strong operational track record, a well diversified portfolio and the continuous construction and expansion of development projects, leading to significant growth and cash flows going forward.
SM Prime is one of the biggest integrated property developers in the Philippines and also one of the largest in Southeast Asia by market capitalization.
SM Prime reported a net income of P32.2 billion in 2018, up 17 percent from previous year’s level.
Consolidated revenues reached P104.1 billion, up 14 percent due to additional rental income from new and expanded malls, and higher contribution from residential sales.
“Over the projected period, profitability will remain stable. The increase in revenues will continue to be driven by rental income, coupled with strong real estate sales,” Philratings said.
Philratings expects rental fees to account for the bulk of revenues, while contribution from real estate sales will increase as project completions during the period translates into higher unit sales.
“Cash flows from operations will be an uptrend, on the back of robust operating income. From 2019 to 2021, a significant portion of cash outlays will continue to be allocated for investment properties, as the company grows its property portfolio,” the ratings agency said.