Three facts about SM Prime Holdings (SMPH, Financial):
- SM Prime Holdings is the largest mall operator in the Philippines with 50 as of the most recent annual report (2014). In total, the malls receive 3.5 million visitors per day. That will be 3.55% of the Philippines’ total population "chilling" in its malls daily (source).
- As of December 2014, SM Prime is 49.16%-owned by SM Investments Corporation and 24.74%-owned by the Sy family. This ownership structure presents ~74% ownership of the Sy family. Although I failed to identify in its recent annual report the exact ownership per director, the report only revealed that 22% of SM Investments is owned by its directors, which consisted of tenured Sy family members as shown below:
(SM Investments Corporation Ownership Structure, 2014 annual report)
The numbers
* Using the local Philippine peso (Php), which currently has an exchange rate of $1 to 46.56 Php. The only way to invest in this company, as a foreign investor, is by buying the iShares MSCI Philippines ETF.
Revenue and growth
The huge 2013 sales growth was secondary to the "streamlining" of real estate business involved in the SM property group of companies. As highlighted in a May 2013 Bloomberg article, two other publicly listed SM companies (SM Development [SMDC] and SM Highlands) were to be delisted and have a share swap with SM Prime Holdings (source).
Undoubtedly, the streamlining effort above in 2013 made the previous short-term revenue growth higher than in the previous five or seven years.
Profit and growth
SM Prime has been a tremendous earner for its shareholders.
Profit margin revealed that SM Prime is earning more than 30 cents per peso earned. Outstanding.
Historical numbers showed that SM Prime has been experiencing somewhat "less" profitability.
Book value
Book value remarkably grew in 2014. Presumably this was secondary to the streamlining even in 2013.
Free cash flow and growth
Free Cash Flow dropped 71% in 2014.
Dissecting its 2014 annual report on page 66 (source) revealed that SM Prime significantly stated losses in "Accounts payable and other current liabilities." It can be asumed that SM Prime paid its creditors with its cash flow in this period, therefore resulting in less cash flow to shareholders in terms of possible dividend and share buybacks.
Debt to Equity ratio
SM Prime maintained a nine-year d/e average of 0.67.
Dividend and growth
Rarely has any company in the Philippines been observed producing steady dividend growth.
Payout ratio
Payout ratio revealed that the company is paying less to its shareholders despite showing increased dividend growth in recent years.
Valuations
It was hard for to find current valuation of the local Philippine Composite Index. Standard & Poor's 500’s valuation was used as comparison instead. As a result, SM Prime is trading at premium compared to the S&P 500.
Intrinsic valuation
SM Prime trades at 21 Php per share.
Simple multiple
Simple multiple revealed that current market price is selling at a premium.
Capital Asset Pricing Model (CAPM)
* Data not included in the graph were as follows: Ten-year Philippine government bond rate of 4.97%, average beta of 1.1 (using Reuters, Barron’s and Financial Times), equity risk premium of 8.84%, tax rate of 25%, weighted average interest debt rate of 4.87%.
Bond information (source)
Nevertheless, the company is excellent in financial performance – a rarity among the publicly listed companies in the Philippines – but pricey at the moment.
Happy Investing!
Mark Yu
