SM Prime offers P10B bonds, gets highest credit rating

MANILA, Philippines — Property giant SM Prime Holdings Inc. is set to return to the local bond market with an offering of P10 billion worth of fresh securities, which obtained the highest credit rating possible from local credit watchdog Philippine Rating Services Corp. (PhilRatings).

In a press statement, Philratings said it had assigned an issue rating of “PRS Aaa” to SMPH’s proposed bond issue of P10 billion, which represents the fourth and last tranche of the company’s three-year debt securities program of up to P60 billion.

The rating has a “stable” outlook, which indicates that the rating is likely to be maintained in the next 12 months.

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

Philratings said the issue rating reflected the following key considerations: “SMPH’s strong financial profile; its solid brand equity, with a strong operational track record; the company’s well diversified portfolio, with business segments and developments that complement each other; its continuous construction and expansion of development projects, leading to significant growth and cash flows going forward; and management’s solid track record and focused implementation of strategic priorities.”

Philratings noted that SMPH’s earnings remained robust, with net income attributable to equity holders of the parent recorded at P32.2 billion in 2018, and representing a year-on-year increase of 16.7 percent. Consolidated revenues amounted to P104.1 billion for the same period. The growth was attributed to 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,” Philratings said.

Philratings said housing demand, from both local and foreign buyers, would likely remain buoyant, going forward.

As of end-December 2018, SMPH operated and maintained 72 shopping malls in the Philippines, with a total gross floor area (GFA) of 8.3 million square meters, making SMPH the largest mall operator/developer in the country.  It also operates seven malls in China with a total GFA of 1.3 million sqms located in Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing, Zibo and Tianjin. /muf