Makati—(PHStocks)—Philippine Rating Services Corporation (PhilRatings) has assigned an Issue Credit Rating of PRS Aaa to SM Prime Holdings Inc.‘s (PSE: SMPH) proposed bond issue of PhP15 billion, with an oversubscription option of PhP5 billion, for a maximum aggregate amount of PhP20 billion. The rating for SMPH’s outstanding bonds amounting to PhP20 billion was likewise maintained at PRS Aaa.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. PRS Aaa is the highest rating assigned by PhilRatings.
The ratings reflect the following key considerations: (1) SMPH’s strong financial profile given its stable profit performance and established ability to generate cash flows; (2) its solid brand equity and operational track record, with the company being led by a highly experienced management team; (3) SMPH’s well diversified portfolio, with components that complement each other; and (4) its ability to successfully tap the capital market for alternative sources of funds as needed.
PhilRatings’ ratings are based on available information and projections at the time that the rating review was performed. PhilRatings shall continuously monitor developments in relation to SMPH and may change the ratings at any time, should circumstances warrant a change.
The consolidation of SM’s real estate properties made SMPH one of the biggest integrated developers in the Philippines, with its strong position domestically further enhanced by its growing mall operations in China. SM projects, particularly in terms of mall development, have a solid and established following as SM Malls are constantly expanding and keeping up with customer requirements. As of report writing date, SMPH operated and maintained 52 malls in the country, with a total Gross Floor Area (GFA) of 6.6 million sq. m. In the Philippines, SM malls are strategically located in Metro Manila and in the provinces of Luzon, Visayas and Mindanao. For its China operations, SMPH currently owns five (5) malls. These are located in the cities of Xiamen, Jinjiang, Chengdu, Suzhou and Chongqing, with a total GFA of 0.8 million sq. m.
SMPH’s strong profitability continued for the first half of 2015. Bottom line was at PhP18.65 billion, already slightly higher than the recorded net income for full year 2014 (PhP18.39 billion).
For the first half of 2015, cash flows from operations amounted to PhP12.6 billion. Cash and cash equivalents as of end June 2015 were at PhP19.6 billion.
Current ratio was still comfortable at 1.2x as of end-June 2015, while the company maintained its solvency ratio at 2.0x for the same period.
Over the projected period, earnings will remain robust. Revenues will still be driven by the strong rental fees coming from its mall operations as SMPH continues to expand and construct and open more malls. Rental fees will continue to account for the bulk of total revenues.
Its solvency ratio will likewise remain at comfortable levels over the projected period. Total assets will continue to build up and will continue to outpace the growth in total liabilities.
PhilRatings has likewise assigned a Rating Outlook of Stable to SMPH’s credit ratings. An Outlook is an indication as to the possible direction of any rating change within a one year period and serves as a further refinement to the assigned credit rating for the guidance of investors, regulators, and the general public. A Stable Outlook is defined as: “The rating is likely to be maintained or to remain unchanged in the next 12 months.”