Reclamation seen as SM Prime’s next growth engine
MANILA, Philippines – SM Prime Holdings Inc. remains a compelling investment despite investor concerns over its residential and office businesses, with its dominant malls segment and massive Pasay reclamation project expected to underpin long-term growth, according to a report by First Metro Securities and DBS Bank.
The report said the market appeared overly focused on weakness in the residential and office segments while overlooking the strength of the company’s malls business, which continues to generate the bulk of earnings and cash flow.
READ: SM keeps up Pasay reclamation
Analysts noted that malls accounted for 60 percent of revenues and 72 percent of pre-tax income in 2025.
The segment also posted a 15.3-percent compounded annual growth rate from 2022 to 2025, significantly faster than the Philippine economy’s 5.2-percent growth pace during the same period.
The report also maintained its “buy” recommendation on the Sy-led property giant, although it trimmed its 12-month target price to P24 per share from P28 previously.
The revised target still represents an upside of nearly 34 percent from SMPH’s June 8 closing price of P17.92.
SM Prime’s mall portfolio remains the largest in the country, with over 9.8 million square meters of gross floor area and roughly half of the Philippines’ total mall space.
In the first quarter of 2026, mall revenues rose 8 percent while earnings before interest and taxes increased 11 percent.
Occupancy remained strong at 96 percent for long-term leases and 92 percent for short-term leases.
While SM Prime ended the first quarter with net debt of P390.7 billion and a net debt-to-equity ratio of 0.82 times, it generated nearly P76 billion in operating cash flow in 2025 and maintained healthy interest coverage of over five times.
The report likewise highlighted the 360-hectare Pasay coastal development, also known as Pasay 360 or SM Smart City, as SM Prime’s next major growth platform.
Reclamation works have been completed, with turnover targeted by 2028. Of the total project area, about 176 hectares are attributable to SM Prime.
“Malls pay the bills; Pasay 360 builds the future,” the report said, summarizing its investment thesis on the property giant. INQ
