SHOPPING mall operator SM Prime Holdings Inc. (SMPH) may have to tap borrowings to fund next year’s expansion program to be implemented here and in China.

In an interview, executive vice president and chief finance officer Jeffrey C. Lim said of the P10-billion capital expenditure SMPH is allotting for 2009, they are considering possibilities of funding half of the amount through debt since the company has a very stable debt to equity position.

“We are looking at various options but maybe more on debt because we are not leveraged enough,” he said.

The company is spending around P7 billion to build three new malls in Naga (Bicol), Pamplona (Las Piñas) and Rosario (Cavite) next year and expand SM Rosales (Pangasinan) and SM North Edsa. By the end of 2009, SMPH will have 36 malls under its portfolio with total gross floor area of 4.5 million square meters (sq.m.).

For China, SMPH’s plan is to put up one mall per year. Company president Hans T. Sy said SMPH is building one next year in Chongquing, while two more are planned in 2010 and 2011 to be located in Suzhou and Zibo in Guangdong province.

“Borrowings to support our China operations may happen after the first quarter of 2009,” Lim added. 

The company currently has three malls in southern and western China, namely, Xiamen, Jinjiang and Chengdu.SMPH remains to one of the most profitable businesses of the Sy-led SM Investments Corp.

Notwithstanding the tough business environment, SMPH’s net income for the first nine months of the year grew 9.3 percent to P4.7 billion on the back of a 10.3-percent increase in consolidated revenues amounting to P12.8 billion.

For the third quarter alone, the listed firm’s net income jumped 8.5 percent to P1.53 billion, while revenues went up 15.4 percent to P4.5 billion. The January-September results include the operations of the three SM malls in China following their acquisition late last year.

“It is very encouraging for us to see steady growth in SM Prime’s operations this year at the back of a very challenging business climate. We feel fortunate that Asia appears to be in a much better position to weather the global financial turmoil,” Sy said.

Rental fees still accounted for the largest share to SMPH’s nine-month consolidated revenues with P11.1 billion. The increase came from both same store rental growth, which increased 5 percent and from additional floor space generated by new malls namely SM City Marikina in September of this year, and SM City Bacolod, SM City Taytay and SM Supercenter Muntinlupa in 2007. In addition, the existing malls—SM City Pampanga, SM City Cebu and SM Mall of Asia—were expanded.

Meanwhile, cinema ticket sales fell 7 percent to P1.3 billion from P1.4 billion in 2007 due to shortage of blockbuster movies during the period.

For the remainder of the year, the company is set to open SM Supercenter Rosales in Pangasinan and SM City Baliuag in Bulacan. The new Atrium of SM Megamall is also expected to be open for business in November. SM City North Edsa and SM City Fairview are also currently undergoing expansion and due for completion in 2009.