STOCK IN FOCUS: SM PRIME HOLDINGS (SMPH)

BROKER: AB Capital Securities
RECOMMENDATION: Buy
TARGET PRICE: 20.60
TARGET PRICE ISSUED ON: 10 Jan 2014

SUMMARY OF BROKER’S OPINION

SMPH’s 9-month net income in 2013 of PHP 11.65 billion was just slightly higher than PHP 11.648 billion in 2012 due to reorganization costs of PHP 1.24 billion. Excluding these costs, SMPH would have posted an 11% growth year-on-year (yoy). In 2014, we expect SMPH’s Net Income to grow by 17% to PHP  4.19 billion.

SMPH’s Historical Performance and Forecasts

The merger of SMPH’s real estate business with 5 segments (malls; residential; commercial; hotels; and conventions and leisure) expected to be completed in early 2014 will result to SMPH becoming a leading integrated real estate company in the Philippines and among the biggest in Asia, well positioned to pursue

next phase of growth.

For its local expansion, SMPH plans to build 2 new malls this year and expand 2 other existing malls to end the year with 50 malls with a total Gross Flooe Area (GFA) of 6.6 million sqm. It also has 14 ongoing condominium projects in Metro Manila and 1 in Tagaytay. In Dec 2013, SMPH purchased 90% of CPI Asia Ten B.V which owns 5 office buildings in BGC, adding 147,000-148,000 sqm. Gross Leasable Area (GLA) to SMPH’s office leasing portfolio as of end-2013. 

Internationally, the merger will strategically position SMPH to bring its residential business and build Lifestyle Cities in China. In 2014, it will launch a new mall in Zibo within the Shandong province with a GFA of 154,000 sqm. Also under construction, expected to be completed in 2015, is a shopping center in Tianjin City with a GFA of 540,000 sqm. SMPH will have a GFA of 1.5 million sqm. in China by 2015. 

RECOMMENDATION: SMPH currently trades at 19x 2014P/E, with a 38.8% upside to our 12-month Target Price of PHP 20.60 per share. With SMPH poised to become one of the biggest real estate companies in Asia, we rate SMPH a BUY.




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