Summary of Broker’s Recommendation
| Stock Code | SMPH |
| Company Name | SM Prime Holdings |
| Broker | RCBC Securities |
| Opinion Issued on | 5 Jan 2023 |
| Recommendation | Buy |
| 1-Year Target Price | PHP 41.40 |
We currently have a Buy recommendation on SMPH with a Target Price of Php41.40/share.
We set our target price at Php41.40 based on an estimated net asset value (NAV) per share of Php43.83, and applying a 6% discount-to-NAV, which is based on the average of SMPH’s current and 2017-2019 discount-to-NAV.
Our target price offers an upside of 12.7% and a composite return of 13.4%, inclusive of our estimated 12-month forward dividend yield of 0.7%.
Analysis and Opinion
Core net income up 41% to Php22.0 billion
SM Prime Holdings, Inc. (SMPH) reported 9 months (9M) 2022 core net income of Php22.0 billion, 41% higher year-on-year (yoy). PH mall revenues jumped 114% to Php33.9 billion driven by the resumption of charging full-rental rates starting July 2022, while revenues from China malls slid 7% to RMB550.0 million (~Php4.4 billion), weighed down by strict COVID-19 restrictions in the country.
Residential revenues declined 12% to Php28.3 billion, dragged by higher sales cancellations as a result of the lapse of the Bayanihan Act. As a result of higher mall rental charges and notwithstanding softer residential sales, EBITDA climbed 47% to Php43.5 billion, reflecting a 7.3ppt EBITDA margin expansion to 59.1%.
Mall revenues approaching pre-COVID levels
3Q mall revenues rose 124% yoy and 6% qoq to Php14.6 billion (equivalent to 95% of 3Q2019 levels), underpinned by normalized rental rates, alongside improved tenant sales amid pent-up consumer demand. Foot traffic was at ~85% of pre-COVID levels during weekdays and ~105% on weekends, while average occupancy rates improved to 92% in 3Q vs. 91% in 2Q.
Residential sales rebound on lower cancellations
3Q residential reservation sales rose 16% to Php24.5 billion, led by the take-up of mid-rise buildings (MRBs). Meanwhile, 3Q residential sales improved 33% yoy and 63% qoq to Php10.1 billion on the back of higher construction progress, alongside lower cancellations.
2023 core net income to exceed pre-pandemic levels
We are revising our 2022/2023 core net income forecast downwards by 9%/2% to Php31.0 billion/Php39.6 billion, representing 42%/28% yoy growth, to account for softer-than-expected residential sales.
Meanwhile, we project 2024 core net income to grow 12% to Php44.5 billion. Despite our forecast downgrades, we reaffirm our view that SMPH’s core net income will exceed pre-pandemic levels beginning in 2023, underpinned by recovering tenant sales, normalization of mall rental rates, and growing mall footprint.
Check how many brokers recommend this stock
This report is prepared by PinoyInvestor’s partner broker below. Find out more about our partner brokers and sign up to avail their complete trading brokerage services.
