SM Prime’s P20B bond offer gets AAA rating

Regional property giant SM Prime Holdings Inc. has obtained a triple-A credit rating from local credit watchdog Philippine Rating Services Corp. (Philratings) for its proposed bond offering worth as much as P20 billion.

The bonds are part of SMPH’s proposed three-year debt securities program worth up to P60 billion. The proposed base offer is P15 billion with an oversubscription option of P5 billion.

In Philratings’ rating scale, obligations rated “Aaa” are deemed of the highest quality with minimal credit risk. It also suggests that the borrower’s capacity to meet its financial commitment is “extremely strong.”

The rating was given a “stable” outlook, indicating that this likely to be maintained or to remain unchanged in the next 12 months.

The triple-A rating on SMPH’s outstanding bonds amounting to P50 billion was likewise maintained.

In a press statement on Monday, Philratings said the rating reflected SMPH’s “strong’ financial profile, “solid” brand equity and very good operational track record; well diversified portfolio and continuous aggressive construction and expansion of development projects, leading to significant growth going forward

Over the years, Philratings said the property company had 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. With its continued aggressive construction, improvements and expansion, Philratings noted that its mall developments had consistently enjoyed a strong market presence.  

As of end-2016, SMPH operated 60 malls in the Philippines, with a total gross floor area of 7.66 million square meters (sq.m.) This year, SMPH is set to open the following malls: SM Luna Tuguegarao; SM Puerto Princesa; SM Cherry – Antipolo; and, SM Cagayan de Oro. All these are expected to be completed around during the period March to August 2017.

The company has likewise expanded its footprint outside the Philippines and currently operates seven malls in China. The China malls, with a total GFA of 1.27 million sqms, are located in Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing, Zibo and Tianjin.

SMPH’s income attributable to equity holders of the parent stood at P23.8 billion in 2016. Consolidated revenues amounted to P79.8 billion last year.

“Over the projected period, profitability will remain strong. Revenues will continue to be e driven by rental fees coming from shopping mall operations, as SMPH continues to expand, construct and open more SM malls,” Philratings said.

SMPH’s gameplan is to develop four to five malls in the Philippines each year for the near term, and also to opportunistically expand its presence in second and third tier cities in China by building one mall per year for the near term, in each case subject to market conditions.

The last time that SMPH tapped the local bond market was last year, when it raised P10 billion from the issuance of 10-year retail bonds at 4.2005 percent annum. This was also part of the P60 billion borrowing program approved by the Securities and Exchange Commission under a three-year shelf registration program.

Capital expenditure for 2017 is estimated at P61.4 billion, with 51 percent for mall development, 29 percent for residential, 15 percent for commercial and 5 percent for hotels and convention centers, based on the prospectus filed under shelf registration.