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SMDC on P71B expansion binge

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Residential property developer SM Development Corp. unveiled on Wednesday a P71-billion three-year expansion program and a top management change, as it affirmed its upbeat outlook on the affordable residential property segment of the sector.

The company announced the appointment of Jeffrey Lim, chief finance officer of sister firm SM Prime Holdings, as its new president. Lim will continue to hold his post in SM Prime as the SM group studies the possibility of consolidating its property units.

SMDC also announced that for the first quarter, its net profit increased by 12 percent to P1.4 billion on the back of improved profit margin and increased business volume.

Net profit margin improved to 23 percent from 22 percent in the same period last year.

For this year, SMDC plans to roll out 13,300 residential units compared to about 12,600 units sold last year. This suggests P33.8 billion worth of additional inventory to the property market based on the company’s average selling price of P2.6 million per unit.

About P20 billion is budgeted for capital spending this year, of which P13 billion will go to project financing and P7 billion for landbanking.

“For 2013, we plan to launch four new projects and expand three existing developments in Metro Manila. The current economic expansion that can lead to higher savings and disposable incomes and a greater need for a better quality of life should continue to underpin demand for projects in prime locations,” said SMDC vice chairman and chief executive officer Henry Sy Jr.

Sy said there was no bubble forming in the affordable property market. If at all, he said high-priced and large residential condominium segment would be more vulnerable to such bubble.

For 2014, capital spending was programmed at P26 billion and for 2015, it will be P25 billion, Lim said.

In the meantime, SMDC said singer Sarah Geronimo would be added to its roster of brand ambassadors for the year.

For the first quarter, SMDC’s sales take-up—an indicator of future growth—consisted of 2,560 residential units. Sy said this was good but not as good as last year’s level because sales take-up in 2012 was boosted by a “blockbuster” product—Shell Residences at the Mall of Asia complex. The company, however, expects to come up with similar “blockbuster” projects in the second half of the year.

Lim said SMDC’s land inventory had reached 173 hectares, 69 hectares of which were in Metro Manila and the rest in key growth areas like Cebu and Davao.

For the first quarter, SMDC’s cash flow as measured by earnings before interest, taxes, depreciation and amortization (Ebitda) stood at P1.7 billion, for an Ebitda margin of 28 percent. Return on equity stood at 13.2 percent versus 13 percent last year.


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