SM PRIME Holdings, Inc. saw its earnings drop by more than half in the first quarter of the year in the absence of one-time gains seen in 2015, but delivered a sustained growth in recurring income on the strength of its shopping mall business.
 
The Henry Sy-led integrated property developer posted a net profit of P5.8 billion in the January to March period, 54% lower compared to the P12.63 billion recorded a year ago.
 
Last year’s bottomline was inflated by a P7.4 billion one-time trading gain on marketable securities booked in the first quarter of 2015.
 
Stripping off extraordinary items, core net income grew 12% in the first three months of the year, supported by a 10% year-on-year uptick in consolidated revenues to P18.2 billion from P16.7 billion.
 
“It (core net profit) was in line with our estimates, but SM Prime still remains strong because mall revenues still grew. The next quarter will be a better one because the first quarter was just the start of recovery from a dismal fourth quarter for property companies,” Victor F. Felix, equity analyst at AB Capital Securities, Inc., said in a phone interview.
 
REVENUES RISE
Mall revenues climbed 11% to P11 billion driven by the opening of five new malls last year that added a total gross floor area (GFA) of 738,000 square meters (sq.m.) as well as the 7% growth in same-store revenues. Shopping malls accounted for 60% of SM Prime’s consolidated revenues, 85% of which comes from rental income.
 
The residential group, which contributed 32% to consolidated revenues, registered a 5% increase in revenues to P5.8 billion due to higher construction accomplishments of three projects launched in 2013 to 2015. This was also supported by the improved sales take-up of three projects located in the cities of Quezon, Parañaque, and Makati. 
 
Revenues from the commercial properties group, which accounted for 5% of consolidated revenues, jumped 16% to P1 billion on the back of the opening of office projects in Quezon City and Pasay City with a combined GFA of 171,000 sq.m. These buildings enjoy an average occupancy rate of 99%.
 
The hotels and convention centers business went up by 22% to P617 million due to the improvement in the average room and occupancy rates coupled with the opening of 154-room Park Inn Clark in Pampanga. SM Prime will unveil the 347-room Conrad Manila in the second half of the year.
 
“SM Prime’s massive expansion last year propelled our performance this quarter. Our strong balance sheet coupled with consistent recurring revenue and income should allow us to pursue our growth plans this year and in the medium term,” SM Prime President Hans T. Sy was quoted in the statement as saying.
 
SM Prime is on the third year of a five-year program that entails a capital spending budget of P400 billion to beef up its businesses that will double earnings by 2018.
 
Shares in SM Prime added 10 centavos or 0.44% to close at P22.75 each on Monday.