May 06, 2014

SMPH posts 11% hike in 1Q14 net income

In a press statement, SM Prime Holdings Inc said its 1Q14 net income rose 11% YoY to P4.58b. Consolidated revenues rose by just 3% to P15.35b as mall revenues were weighed by falling real estate sales.

Rental revenues grew 12% to P8.56b (equivalent to 56% of consolidated revenues) owing to new mall openings and same-store rental growth of 7%. Cinema ticket sales soared 40% to P1.06b owing to a higher number of cinemas related to mall expansion and due to the 100% YoY growth in the number of blockbuster movies. Meanwhile, amusement and other revenues also posted hefty growth (+30%) to P710m due to the opening of new amusement rides and the reopening of the ice skating rink in SM Megamall.

On the other hand, real estate sales fell 17% to P5.02b (33% of consolidated revenues) on lower sales take up given the limited number of project launches during the quarter. However, lower costs of sales helped raise real estate gross margin to 42% in 1Q14 from 39% in 1Q13.

Our take: The results were largely in line with expectations, with the 1Q14 earnings accounting for 24% of full-year consensus forecast. Pending greater contribution from the other segments of SMPH expanded business and a more significant pick up in residential sales, we expect the real estate business to continue weighing on growth. Notwithstanding the slight improvement in real estate margins, overall operating margin of SMPH fell to 62.5% in 1Q14 from 65.4% in the same period last year. – WealthSec