The Sy family’s SM Prime Holdings Inc., a leading integrated property developer in Southeast Asia, plans to raise up to P25 billion from the issuance of triple-A-rated bonds.
In a disclosure to the Philippine Stock Exchange (PSE), the firm said Philippine Rating Services Corporation (PhilRatings) has assigned its highest rating of PRS Aaa to SM Prime’s proposed bond issue of up to P20 billion, with an oversubscription option of up to P5 billion.
The proposed issue represents the second tranche of the company’s P100 billion Shelf Registration of Fixed Rate Bonds approved by the SEC on May 23, 2024.
PhilRatings said the rating for SMPH’s outstanding bonds amounting to P137.8 billion was likewise maintained at PRS Aaa. PhilRatings assigned a Stable outlook for the ratings of the proposed and outstanding bonds.
PRS Aaa denotes that such obligations are of the highest quality with minimal credit risk and that the issuing company’s capacity to meet its financial commitment on the obligations is extremely strong. A stable outlook means the rating is likely to be unchanged for the next 12 months.
"The assigned issue ratings take into consideration SMPH’s sustained recovery in profitability; strong liquidity; sound capitalization; well-experienced shareholders and seasoned management; and solid brand equity," said PhilRatings.
The proceeds of the issuance will be used for SM Prime’s debt refinancing and capital expenditure (capex).
SM Prime is increasing its capital expenditures to P100 billion to P110 billion next year as it continues to expand its core businesses.
“Actually, our forecast (capex) for this year is P100 billion but I don’t think we’ll get to P100 billion actually,” SM Prime President Jeffrey Lim said.
He noted that the company continues to expand its product offerings and is slated to open at least four, maybe even five, new malls in 2025. These will be in La Union, Zamboanga, Laoag, and Sta. Rosa, Laguna, near Nuvali.
With a landbank of approximately 2,374 hectares, PhilRatings said the Company is well-positioned for continued development over the next five to seven years.
It added that, "Moving forward, SMPH’s bottom line is seen to steadily grow. This will be attributed to the revenues from same-store rent plus contributions of new malls, offices, hotels, and expansions, as well as sales of ready-for-occupancy (RFO) units and new launches of mid-rise and horizontal projects."
Aside from new malls in the pipeline, SM Prime is also spending on the expansion and renovation of its existing malls. Lim explained that “what we do is like, every five years we do a refresh, and then [after] eight years, we look into redevelopment.”
“We continuously evolve because consumers now are very demanding—especially the millenials…It’s not just about shopping and eating anymore. It’s the experience when they go inside the mall. So, that’s why, we have to a lot of amenities and then, we also have to bring in new concepts,” Lim said.
SM Prime, through SM Development Corporation, also continues to launch new projects, mostly in the provinces, where demand is stronger, but will include one in Metro Manila.
“But we have to closely monitor the inventory level,” said Lim, who disclosed that they currently have enough units in their inventory, which is good for 16 months of sales.
For its office leasing business, he said SM Prime is currently constructing 6 ECom in the Mall of Asia complex after noting that the departure of Philippine Offshore Gaming Operators (POGOs) did not significantly impact the company since “we have not been big in that space.”
While there is more competition from former lessors of POGOs with vacancies weighing on rental rates, Lim said, “the office group that we have is doing well” due to demand from business process outsourcing firms that are expanding and requiring more space.
A portion of SM Prime’s capex is also allotted to the ongoing reclamation project in Manila Bay, where it had earmarked a capex of P20 billion for 2024.