Investors are advised to buy stocks of SM Prime Holdings, Inc. (SMPH) in view of the Sy-led firm’s strong earnings and the potential benefits of its aggressive expansion program.

In a statement, the country’s largest shopping mall developer and operator said revenues rose by 16% to P15.35 billion from P13.22 billion, boosted by higher rent from three malls that opened last year – SM City Bacolod, SM City Taytay, and SM Supercenter Muntinlupa.

The publicly-listed firm’s net income went up by 10% to P5.97 billion income in 2007. the figure is in line with the company’e earlier projection to increase its bottom line by 10%-13%.

“SM Prime successfully met its 2007 targets. We are satisfied with this achievement,�? SM Prime president Hans T. Sy earlier said.

Rent accounted for 83% of total revenues, pulling in a 17% growth to P12.81 billion from P10.97 billion.

“SM Prime’s rent revenues are strong because they have an established market. People flock to these areas as everything you need is under one roof: gym, grocery, etc.,�? said Accord Capital Equities, Inc. analyst Claire Quiray.

Meanwhile, cinema ticket sales showed a strong performance increasing by 15% to P1.84 billion, supported by both domestic and international blockbuster films.

As a result of SM Prime’s aggressive expansion programs, the firm’s total gross floor area will increase to 4.1 million square meters by the end of 2008 against 3.9 million square meters last year.

As the firm has already existing tenants, the malls’ continued expansion will not be a problem as these spaces will be easily occupied, the analyst said.

The newly opened malls, I fact, have an average occupancy level of 96%.

The company is also spending P6 billion to open SM Supercenter Rosales in Pangasinan, SM City Baliuag in Bulacan, and SM City Marikina and expand Metro Manila malls SM City Fairview and SM Megamall.

Aside from its recently opened malls in Metro Manial and nearby areas, SM Prime is set to widen its operations to include the three SM malls in China owned by the Sy family.

SM Prime recently said its board had agreed to fold the three malls into the company, for which it will pay P8.5 billion. The acquisition will be made through a share swap where SM Prime will issue 913 million new shares to the Sy family.

“The move will allow SM Prime to gain a foothold in China’s fast-growing economy and use this as a platform for long-term growth outside of the Philippines where it is already the dominant shopping developer,�? the firm said.

The SM malls in China are located in the southern and western parts of China – Xiamen, Jinjiang, and Chengdu. Among the anchor tenants of the three malls are Wal-Mart and SM Laiya Department Store, Cybermart and Wanda Cinema.

Given these recent developments, stock portal 2TradeAsia placed a “long-term buy�? recommendation on SMPH shares. The brokerage firm expects SM Prime’s net income to reach P6.47 billion this year.