SM Prime steps up shopping mall devt program

With personal consumption on an upswing and expected to continue growing over the medium-term SM Prime Holdings is going full swing in its shopping mall development as it expects to bankroll three projects within the year, a company official told The STAR.

SM Prime, is spending some P4 billion for capital expenditure this year, up 33 percent from P3 billion last year, to finance the initial phases of these projects, including land acquisition and construction. This amount, he said would be taken out from the firm's internally generated funds.

The three major projects set to start construction this year are the Mall of Asia, touted as the biggest shopping mall in the region, Along Roxas Boulevard and two malls in Bicutan, Parañaque and in Davao City. However, construction of the mall in Davao City might be postponed if the conflict in Mindanao remains unresolved, other sources said.

The firm, the official said, has P11.5 billion in cash reserves that it intends to use to finance these projects. Thus, there is no need to borrow. "If the amount needed for these projects exceeds the budget for capital expenditure, we can finance it from our cash reserves," he said. "The last time we borrowed was in 1996."

SM Prime, one of the country's pioneers in mall development recently opened its ninth mall in Manila last April 29. It is set to open another one in Pampanga by October this year. On the other hand, construction of another mall in Sucat started late last year.

Analysts said these projects are expected to further strengthen the firm's foothold in the industry ahead of its competitors.

"Expectations of modest economic recovery highlighted by a strong personal consumption expenditure (PCE), should bode well for SM Prime," an analyst from a foreign brokerage houses said. He said its net income expected to grow by 17 percent this year to P3.347 billion.

During the first quarter of the year, PCE, or the amount spent by households, grew by 3.2 percent from 2.5 percent during the same period last year.

"The company's aggressive mall roll-out program and the annual increase in rental rates should support this earnings momentum," the analyst said. During the first quarter of the year, SM Prime reported a 10 percent rise in its net income to P813.9 million.