May 04, 2015

SMPH grows 1Q15 core net income by 14%

In a press statement, SMPH yesterday said its 1Q15 net income grew 176% YoY to P12.6b, including P7.4b in extraordinary gain on sale of marketable securities. Excluding the latter, core net income rose 14% to P5.2b. Consolidated revenues amounted to P16.7b with rental income rising by 10% to P9.4b. Real estate sales also grew 7% to P5.4b. Meanwhile, consolidated expense growth was muted at +5% YoY resulting in EBIT margin of 46% vs. 42% in 1Q last year.

Our take: In an update we released yesterday, we noted that revenues were slightly behind our expectations but we believe that this is basically due to seasonal trends. We expect revenues to pick up towards the latter part of the year (with 4Q being the strongest season for malls sales) while the new malls should ramp up operations going forward. Notwithstanding the slight shortfall in revenues, margins were better than expected.

After falling by as much as 13% from its year-high of P21.35, SMPH’s share price now offers a 13.2% upside to our target price of P21.50 in addition to a 1% dividend yield. This merits a Buy under our rating system even as we expect SMPH’s prospects to be underpinned steady cash flow and earnings growth. – WealthSec