SM Prime allots P65 B for 2016 capex

MANILA, Philippines - The Sy family’s SM Prime Holdings Inc. is setting aside P65 billion in capital expenditures next year, more than half of which would be used for its mall expansion projects.

About 38 percent of the amount would go to residential while seven percent would go to commercial projects. The rest would be for hotels and convention centers.

SM Prime plans to fund its capital expenditure program through recurring income flows and external financing, the company said.

For this year, SM Prime’s capex is set at P64 billion, with 51 percent for mall projects, 37 percent for residential, seven percent for commercial and five percent for hotels and convention centers.

The company said it would be opportunistic with its expansion projects for next year.

“By maintaining a strong balance sheet, SM Prime believes it will be better to withstand economic and financial cycles, while allowing the company to achieve expansion quickly, as well as give it the flexibility to embark on acquisitions if and when opportunities arise. SM prime intends to maintain prudent debt levels and a sufficient equity buffer with a target net debt-to-equity ratio of no more than 50:50. SM Prime also plans to maintain a relatively long and well spread out debt maturity profile and continue to diversify its sources of funding. SM Prime will take a disciplined approach to the allocation of capital across its projects with strict application of hurdle rates and benchmarks for each investment,” it said.

The company is seeking the nod of the Securities and Exchange Commission (SEC) to issue up to P20 billion in fixed rate peso retail bonds this year.

Proceeds would be used to fund 14 ongoing mall projects across the country.

Of the net proceeds of P14.85 billion – assuming an issue size of P15 billion – SM Prime is setting aside P7.75 billion to finance the completion of three malls in the fourth quarter of 2015 and P7.26 billion to complete six mall projects in the first half of next year.

The three malls to be completed this year are SM City Seaside Cebu, SM City Cabanatuan  and SM Center Sangandaan.

The six malls to be completed next year are SM San Jose Del Monte, SM Trece Martires Cavite , SM Calamba expansion, SM Tuguegarao Center, SM Urdaneta 2 and SM Puerto Princesa.

If the P5 billion oversubscription of the retail bonds would be exercised, SM would use the proceeds to fund three additional mall projects slated for completion in the fourth quarter of 2015. These are SM Commonwealth, SM Bicutan expansion and SM Dagupan.

Two more mall projects including the SM Cagayan de Oro 2 and SM Caloocan Grand Central slated for completion next year are also in the pipeline if SM Prime is able to utilise the additional P5 billion.

In all, SM Prime plans to develop four to five new malls in the Philippines each year and also to expand in second and third tier cities in China by building one mall per year with its long term goal to bring its entire mall empire to 100 malls in the Philippines from roughly 50 shopping centers around the country.