SM Prime core profit jumps 14% in 2016 amid continued mall expansion

SM PRIME Holdings, Inc. continued to grow its core earnings in 2016, as it expanded its portfolio of shopping malls and enjoyed a strong demand across its housing developments.

In a statement issued on Tuesday, the property business of the country’s richest man Henry Sy, Sr. reported a 14% surge in recurring net income to P23.8 billion from the P20.9 billion booked for 2015. Its bottom line rose 19% to P6.4 billion from P5.4 billion in the fourth quarter alone.

But the absence of one-time gains pulled SM Prime’s net income 16% below the P28.3 billion recorded in 2015, when a P7.4-billion trading gain on marketable securities was posted.

The improvement tracked the 12% increase in SM Prime’s consolidated revenues to P79.8 billion from P71.5 billion and operating income to P35.3 billion from P31.4 billion.

“SM Prime sustained its overall performance in 2016 on the account of focusing more on recurring income stream complemented by the solid performance of the housing group,” President Jeffrey C. Lim said in the statement.

The company’s mall operations turned in P48.6 billion, a 9% increase from the P44.5 billion booked for 2015, as rental income increased 10% to P41 billion from P37.2 billion.

SM Prime attributed the mall business’ improved performance to the addition of retail spaces covering 1.5 million square meters (sq.m.) in gross floor area in the past two years, while same-mall sales grew steadily at 7% in 2016.

Cinema and event ticket sales, on the other hand, dropped 3% to P4.7 billion from P4.8 billion “due to fewer local blockbuster movies” screened last year. Revenues from amusement and merchandise sales, meanwhile, rose 16% to P3 billion from P2.6 billion.

Operating income from the malls increased 9% to P25.8 billion from P23.7 billion, while operating margins stood at 53%.

To date, SM Prime has 60 shopping malls covering 7.7 million sq.m. in gross floor area across the Philippines and seven spanning 1.3 million sq.m. in China. It will open at least four new malls offering 300,000 sq.m. of additional shopping space in the country within the year.

The company’s residential business, meanwhile, contributed 32% of the consolidated revenues. The segment led by SM Development Corp. (SMDC) generated P25.4 billion or 13% over the P22.5 billion it booked for 2015.

Operating income from the segment rose 17% to P7.1 billion from P6.1 billion, on higher take-up of ready-for-occupancy (RFO) units in Princeton, M Place, Mezza II and Jazz Residences in Quezon City and Makati City. The RFO inventory accordingly dropped 34% to 2,374 units from 3,617 units.

The consolidated costs of real estate increased 9% to P13.1 billion from P12 billion. Still, the residential group’s gross profit margin widened 48% from 46% and net income margin improved to 23% from 22%.

SMDC saw an 18% jump in reservation sales to P46.7 billion from P39.4 billion, following a 15% rise in volume to 16,320 units from 14,227 units. Projects within and near the Mall of Asia Complex in Pasay City — S Residences, Shore 2 Residences and Coast Residences — delivered bulk of the amount.

SM Prime targets to launch 15,000 to 18,000 more units in high-rise, mid-rise and horizontal house-and-lot developments within the year.

The company’s commercial properties group raked in 3% of the consolidated revenues. It achieved a 32% increase in revenues to P2.7 billion from P2.1 billion, after receiving new rental income from Five E- com Center in Pasay City.

The operating income of the commercial segment surged 57% to P2.1 billion from P1.3 billion, as improvements in revenue generation widened the operating income margin to 77% from 65%.

SM Prime currently operates six office buildings, with an estimated gross floor area of 371,000 sq.m., mostly in the Mall of Asia Complex. Two more office towers — Three E-Com Center and Four E-Com Center — will become online in 2018 and 2020.