SMPH’s future growth driver

Honestly, if there is one stock pick I would bet my future on, it would be SM Prime Holdings.

I cannot help but be amazed by its future development project, specifically the long-term reclamation and development project that mesmerizes almost all who visit the SM Mall of Asia Complex in Pasay City.

Initially dubbed SM Smart City/Pasay 360 by analysts of First Metro Securities Brokerage Corp., it is described as a 360-hectare coastal development in Pasay, positioned as a future mixed-use urban hub directly connected to the SM MOA complex.

It is a priority project of SMPH, with handover targeted by the third quarter of 2028 as scheduled, despite a tougher macroeconomic backdrop. The project is envisioned as a central business district (CBD)-scale integrated estate featuring a world-class mall, offices, residences, hotel, entertainment and convention components, alongside broader uses such as schools, hospitals, universities and a museum.

According to FirstMetroSec, SMPH management has said the development would incorporate smart-city and climate-resilient features to enhance livability, mobility and long-term value retention.

At 360 hectares, FirstMetroSec said, “Pasay 360 is large enough to rival existing CBDs, with the project’s strategic value further enhanced by its direct linkage to the MOA ecosystem, which gives SMPH an existing demand generator and destination asset that few developers can replicate.”

SMPH has assured continued funding for the development, is open to lot sales and partnerships, and sees the project as one of its key long-term growth platforms.

The Metrobank-owned brokerage believes the Pasay reclamation project “meaningfully enhances SMPH’s long-term growth profile and is approaching its value-unlocking stage. SMPH’s Pasay coastal development has been one of the largest investments in the company’s history. With reclamation works completed and turnover targeted by 2028, the project is gradually moving from a capital-intensive phase toward monetization.”

The project, the analysis pointed out, “should increasingly be viewed not just as a source of near-term capital expenditure pressure, but as a key driver of SMPH’s next leg of long-term net asset value (NAV) and earnings growth, with compelling value embedded in the reclamation when viewed against current Metro Manila land prices.”

Located beside SM MOA and within the Manila Bay growth corridor, the reclamation sits in one of the few remaining large-scale urban development sites in the capital. Totaling 360 ha (approximately 176 ha is attributable to SMPH), it is larger than the 340-ha Bonifacio Global City (BGC), “giving SMPH the opportunity to create another major business district over time.”

Based on FirstMetroSec’s estimates, the project costs SMPH around P100,000 per square meter, which remains well below prevailing land prices in established CBDs such as Ortigas Centre (approximately P350,000 to P400,000/sqm), Makati (approximately P700,000 to P1 million/sqm) and BGC (approximately P900,000 to P1.2 million/sqm).

SMPH, FirstMetroSec elaborates, “is building scale in one of the most strategic urban corridors in the country at a cost base that remains attractive relative to replacement values in core Metro Manila. The scale of the reclamation gives SMPH a credible platform to create another major mixed-use district in Metro Manila; one that could eventually rival established hubs such as Makati, BGC and Ortigas.”

“At full build-out, the estate should be able to accommodate offices, residential communities, hotels, entertainment venues, convention assets and lifestyle destinations, creating a self-reinforcing ecosystem that drives long-term activity and monetization.”

Additionally, it was explained, “the government’s share of the reclamation should also improve the area’s long-term demand profile. Potential public uses such as government offices, schools, hospitals and universities could help create a more balanced and self-sustaining district, supporting foot traffic, employment density and activity generation in the Bay Area rather than adding to vacancy risk.”

The value of the reclamation, FirstMetroSec highlighted, “lies not just in the land itself, but in the strategic platform it gives SMPH to develop another CBD-scale estate within the capital. SMPH’s structural advantage is key to this development.”

Unlike most township projects, which typically rely first on residential or office demand to build critical mass, SMPH’s masterplan, the brokerage said, “is anchored by SM MOA, the largest mall in the Philippines, giving the company an existing demand generator and destination asset that few developers can replicate. Over time, SMPH can extend the MOA ecosystem into a broader coastal destination focused on experiences, entertainment, hospitality, lifestyle and mixed-use activity.”

The reclamation should also benefit from the wider SM ecosystem already concentrated in the area (including malls, hotels, convention facilities, event venues, offices and transport infrastructure) allowing the project to evolve into a true live-work-play destination supported by the network effects of SMPH’s existing footprint.

SMPH, it was noted, “is not building a greenfield township from scratch, but rather expanding and deepening an already established ecosystem. Taken together, the Pasay reclamation project should be viewed as a major source of future value accretion, rather than merely a drag on near-term leverage.”

SMPH, FirstMetroSec added, “is clearly in investment mode, but this investment phase is laying the groundwork for what could become one of SMPH’s most important long-term growth drivers. As the project moves closer to reclaimed land proclamation and eventual monetization, we expect the market to increasingly recognize the value of this large-scale, low-cost Metro Manila landbank and the dividends it can deliver in the form of NAV expansion, recurring income opportunities and long-term earnings growth.”

Based on FirstMetroSec’s NAV estimates, “we carry SMPH’s 176 ha share of the Pasay 360 project at cost (P180 billion, or P6.14/share), leaving any future land appreciation as upside. Even at Ortigas CBD rates (approximately P350,000/sqm), implied value rises to P616 billion or P21.48/share.” Further, according to management, SMPH’s 176 ha share is net of public-use areas and is therefore fully saleable and developable.