SM Prime Holdings Inc. sets final P10-billion bond offer

MANILA, Philippines — Property giant SM Prime Holdings Inc. is offering P10 billion worth of bonds to expand its real estate empire.

The offering represents the  fourth and last tranche of the P60-billion shelf registration of fixed rate bonds approved by the Securities and Exchange Commission in 2016.

Local credit watcher Philippine Rating Services Corp. (PhilRatings) has assigned an issue rating of PRS Aaa to SM Prime’s proposed bond offer.  The rating also has a stable outlook which indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months.

Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The issuer’s capacity to meet its financial commitment on the obligation is extremely strong. 

PRS Aaa is the highest rating assigned by PhilRatings. A stable outlook, on the other hand, indicates that the rating is likely to be maintained or to remain unchanged in the next 12 months.

In assigning the rating, PhilRatings considered  SM Prime’s strong financial profile, solid brand equity, strong operational track record, well diversified portfolio with business segments and developments that complement each other, and solid track record and focused implementation of strategic priorities.  

SM Prime  is one of the biggest integrated property developers in the Philippines and also one of the largest in Southeast Asia based on market capitalization. Over the years, the company has grown into one of the most diversified real estate companies in the country, with business interests in malls, residential, commercial, as well as hotels and convention centers. 

SM Prime’s earnings remained robust, with net income growing 16.7 percent to P32.2 billion last year as revenues climbed to P104.1 billion on additional rental revenues 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. Rental fees will continue to account for bulk of revenues, while revenue contribution from real estate sales will increase as project completions during the period translate to higher unit sales. Housing demand, from both local and foreign buyers, is anticipated to remain buoyant, going forward,” PhilRatings said.

As of the end of December 2018, SM Prime  operated and maintained 72 shopping malls in the Philippines, with a total gross floor area of 8.3 million square meters (sqm), making it the largest mall operator/developer in the country.