Market bets on higher SM Prime Q1 earnings

INVESTORS were cautiously optimistic on SM Prime Holdings, Inc. last week as they expect higher first-quarter earnings amid looser movement curbs recently.

Market players maintained their optimism on the listed property development unit of the Sy group after the easing of quarantine restrictions for the past months.

Data from the Philippine Stock Exchange showed around P1.39 billion worth of 38.92 million shares in SM Prime were traded from April 25 to 29, making it the third most actively traded stock last week.

Shares in the Sy-led property developer dipped by 2.9% week on week to P35.00 per share on Friday from its P36.05 finish on April 22. Since the start of the year, the stock has gained 4.5%.

The easing of most quarantine restrictions in recent months resulted in greater confidence among business owners, which prompted market investors to take a look at SM Prime last week, analysts said.

“Foot traffic finally picked up [in malls] as the government removed most restrictions allowing businesses to run 100%,” Salisbury BKT Securities Corp. Equity Sales Trader Juan Paolo R. Dela Cruz said in a text message last Friday.

This pushed SM Prime to “outperform” as investors were awaiting its first-quarter earnings report, he said.

Wendy B. Estacio, senior equity analyst at Philippine National Bank, said investors might have been “cautiously optimistic” and were pricing in a further improvement in SM Prime’s top line in the first quarter of 2022 “given the ease in quarantine restrictions in the past months.”

In an e-mail interview last Friday, she noted that the company’s revenues went up in the past three quarters since the fall recorded in the first quarter of 2021.

More businesses have been allowed to fully operate after Metro Manila and several other locations have been put on the looser Alert Level 1 since March as new coronavirus infections declined.

In its annual stockholders meeting last Monday, SM Prime said it was earmarking P80 billion for capital expenditure this year, the same amount it allotted in 2021.

The bulk of the amount will be used for the development of malls as well as residential and office spaces.

SM Prime targets to open four new malls within the country this year. It also plans to launch around 20,000 residential units, subject to government issuance of licenses to sell.

It also eyes to open its FourECom Center at the Mall of Asia Complex in Pasay City and SMX Clark in Pampanga.

SM Prime’s consolidated revenues inched up by 0.5% to P82.32 billion last year from P81.9 billion in 2020. Its attributable net income rose by more than a fifth to P21.79 billion from P18.01 billion previously.

“[I]nvestors should continue monitoring the pandemic situation, since a large part of the company’s revenues come from the malls business (about 40%),” Ms. Estacio said. “[I]t will remain prone to pandemic-related restrictions, which directly affects foot traffic and tenants’ sales.”

She expects SM Prime to finish the year with a P31.4-billion net income.

Mr. Dela Cruz said investors would look at foreign flows for the company’s stock as foreigners continue to unload in the short term.

For the long term, he said they would look into SM Prime’s completion and the take up of properties and projects outside the National Capital Region.

“Also, look into developments of e-commerce and how they tackle/adjust with the fastgrowing online shopping,” he said.

He expects the property developer to net P7.8 billion during the first three months of the year, and P31.3 billion for fullyear 2022.

For this week, Mr. Dela Cruz pegged the stock’s support and resistance levels at P34.10 and P35.40, respectively.