August 05, 2014

SMPH sustains 12% earnings growth in 1H14

In a press statement, SM Prime Holdings Inc (SMPH) said its consolidated net income grew by 12% in 1H14 to P9.8b, indicating that it has maintained its 12% earnings growth pace in both 1Q14 and 2Q14. This is notwithstanding the marked acceleration in revenue growth in 2Q14 (+11% YoY to P18.08b) vs. the 3% growth registered in 1Q134.

Rent grew by a faster clip (+13% YoY) in 2Q14 vs. 11% in 1Q14 given higher contributions from malls opened in the previous quarters and the opening of the new phase of SM Megamall. Residential revenues also improved on higher progress completion.

Real estate sales went up 9% YoY in 2Q14 to P6.89b, recovering from the 17% decline in 1Q14. Costs of real estate were flat YoY in 2Q14 as the company said it reigned-in construction costs. This led to higher gross profit margin for the business to 44.6% in 2Q14 from 41.5% in 1Q14, bringing the 1H14 gross margin to 43.3% vs. 40% in 1H13.

The acceleration in rental and real estate sales growth made up for the slowdown in ticket sales (+11% in 2Q14 from +41% in 1Q14) and amusement and other revenues (+24% in 2Q14 from +31% in 1Q14).

Our take: In all, SMPH 1H14 results were just tracking expectations and accounted for 53% of full-year forecasts. It earned 54% of its 2013 earnings in 1H13. – WealthSec