THE Philippines’ largest shopping mall developer and operator on Tuesday said its first quarter net income grew as it built more malls and raised rents in existing ones.

In a briefing, Jeffrey Lim, SM Prime Holdings Inc. chief finance officer, said the company’s consolidated net income grew by 10 percent to P1.9 billion at end-March from P1.7 billion in the same period last year.

Revenues grew 15 percent to P5.4 billion, with rental fees accounting for the bulk of the sales at P4.6 billion, or a 16-percent year-on-year growth. Same-store rentals grew at a slower five percent.

Cinema ticket sales rose 20 percent because of the sharp increase in IMAX receipts on the 3D showing of Avatar, Alice in Wonderland as well as in local movies like Miss You Like Crazy and Paano na Kaya.

Operating expenses for the period increased by 14 percent to P2.5 billion from P2.2 billion in 2009, while income from operations improved by 15 percent from P2.5 billion to P2.9 billion.

“We’re bullish for the year. It’s not only because of new malls but [also the] expansion of mature malls will contribute a lot to our profit,” Hans Sy, SM Prime president, said.

The company has earmarked a P12-billion capital expenditure for this year, P8 billion of which will go to its domestic expansion. This year, SM Prime will top off four new local malls starting in Tarlac City on Friday.

Besides Tarlac, other malls will be built in Calamba, Laguna; Novaliches, Quezon City; and San Pablo, Laguna. These will add 234,228 square meters to its total gross floor area.

By yearend, the company aims to have 40 malls nationwide, 16 of which are in Metro Manila for an estimated gross floor area of 4.7 million square-meters. Next year, the company plans to open four shopping centers in Commonwealth, Masinag, Davao and General Santos City.

The remaining P4 billion of SM Prime’s capex has been earmarked for its growth in China.

The company is set to open a mall in Suzhou, Jiangsu province in the last quarter of the year. Over the next three years, SM Prime targets to open one mall in China per year, with the option to increase it to two malls per year.

This will bring the total number of malls in China to 10 by 2014.

Officials said the profits of its operating SM branches in Xiamen and Jinjiang are comparable with those in the Philippines, while SM Chengdu is expected to be in the black this year.

Sy said SM Prime is open to penetrating other markets but its focus remains in developing China.

“We’re open but [there’s] nothing much to attract our appetite yet. China has a very large potential in the future,” he said.

Sy said they have already shelved plans to invest in Vietnam since the market was deemed small and unattractive for the company. SM Prime is also looking at India, given its population and economic growth.

“But we have to study it carefully since it would be hard for us logistically because of its geographical location. It’s far [from the Philippines],” Sy said.

The executive said they are also open to joint ventures in other territories in the BRIC – Brazil, Russia, India and China – group.

“You’re right. We should open up to other territories because I’ve been too focused on China lately,” he said.

To fund its expansion for the year, SM Prime will use internally generated cash, bank borrowing and the proceeds from the real investment trust (REIT) offering for its capex.

“We believe that a REIT presents SM Prime with an opportunity to tap new investors to participate in the expected stable and steady growth of SM Supermalls,” Sy said.

Officials said the company could upsize its planned REIT offering to $500 million from $300 million, depending on investor demand.

The proceeds of the offering will also be used to pay down debt and pay back shareholders.

SM Prime is still in the process of studying various REIT structures and weighing options available to the company. It may include around 15 to 18 local malls under its REIT.

Lim also bared plans of publicly listing its malls overseas but SM Prime has yet to determine the size, timing and the requisite number of malls for the listing.