SM Prime Holdings Inc. fell the most in five days in Manila after the largest Philippine shopping mall operator was downgraded by Macquarie Group Ltd. on the possibility it will post its first decline in same-store sales in 14 years.

SM Prime dropped 2.4 percent to 8.20 pesos at the noon close local time, compared with a 3.8 percent gain in the main Philippine Stock Exchange Index. The stock, the biggest drag in the index today, ended a four-day, 29 percent surge. SM Prime was cut to ‘neutral” from ”outperform” by Alex Pomento, strategist and head of research at the Manila unit of Macquarie, on the prospects softening demand and an economic contraction will push the mall operator to post a drop in same- store sales in 2009.

Pomento cut his 2009 earnings forecast for SM Prime by 13 percent to 6.74 billion pesos (US$ 138 million) and lowered his 12-month share-price target 27 percent to 7.56 pesos. ‘There is a high probability that this may materialize next year,” Pomento said in a research note released today. ”GDP will contract next year. This would result in weaker consumer spending.” Sales may be ”almost flat” at 17.92 billion pesos, compared with 15 percent average annual growth in the past five years, as an economic contraction may shut some merchants and push vacancy in SM’s 33 malls to 10 percent from 5 percent, Pomento said.

‘Rental income will grow a measly 3.2 percent while cinema ticket and amusement activities inside the malls will decline,” he said. It is SM Prime’s third downgrade in less than a month, according to data compiled by Bloomberg. Credit Suisse Group lowered the stock to ”neutral” from ”outperform” on Oct. 29 while UBS AG cut it to ‘neutral” from ‘ buy” on Oct. 9.

‘Significant reductions to our profit forecasts and the consistently strong relative share price performance over the past  12 months drives this downgrade,” Credit Suisse’s Manila research chief Gilbert Lopez said. ‘By any measure, SM Prime is expensive.” SM Prime is trading at 17 times its estimated earnings in the next 12 months, a 20 percent premium over that of the main Philippine Stock Exchange Index. SM Prime has lost a fifth of its value this year, compared with a 44 percent slump in the main stock index.