Posted on 10:04 PM, November 03, 2010 [ BusinessWorld Online ]
SM Development Corp., the property development arm of the Sy mall and banking conglomerate, wants to expand operations in China.
An uptick in demand and the continuous launching of local projects will meanwhile allow the property developer to post P4 billion in net income this year, executives said yesterday.
SM Development will use P11.7 billion in fresh capital from its one-for-three stock rights offering to acquire more land, bankroll existing projects, and expand in China.
The firm yesterday listed 1.83 billion common shares in the local bourse, representing the fully subscribed shares in the rights offer from Oct. 18 to 22, priced at P6.38 per share.
“Proceeds of the stock rights offering will be used mostly for [the] purchase of new lands and construction of all our new buildings and probably some overseas expansion,” Henry C. Sy, Jr., vice-chairman and chief executive of SM Development, told reporters after the company’s listing ceremony in Makati.
“Initially, the company will receive 50% of the total proceeds from the offer equivalent to P5.8 billion, and the other 50% on or before end of May 2011,” SM Development said in a disclosure.
New projects will be built in the Philippines and abroad, officials said.
SM Development has lined up 10 projects next year worth P18 billion to P20 billion.
“[SM Development] always wants to be where SM Malls are for the convenience of our buyers. We will use this formula here and in China,” Mr. Sy said.
SM Development will build residential buildings in its two-hectare property in Xiamen and a four-hectare lot in Jinjiang. The company will spend about two billion to three billion renminbi for the two projects.
“We are already in a stage where we are finalizing [plans]. I am sure next year there will be some construction going on,” Mr. Sy said.
He added SM Development would set up a subsidiary to operate in China.
In the Philippines, the property developer still has land in Cebu, Davao, Tagaytay, and Baguio City.
Meanwhile, the firm’s newest brand, M Place (formerly My Place), which targets young professionals like business process outsourcing employees, will launch more projects next year.
There will be three more projects next year, Rosaline Y. Qua, chief operating officer of SM Development, told reporters.
New M Place condominium buildings might also be built near SM Fairview, Visayas Avenue, and Mindanao Avenue in Quezon City as well as Ortigas Center in Pasig.
Ms. Qua said that for the entire year, SM Development was eyeing P21.5 billion in sales. This will rise to P23 billion to P24 billion next year. Net income is expected to reach P4 billion this year, up by 48% from last year.
Prior to the stock rights offering, SM Development had 5.5 billion issued and outstanding common shares.
The second rights offer is “a clear manifestation of trust and confidence investors and other stakeholders have on the positive prospects of the company,” Mr. Sy said.
In January, the property developer raised some P5 billion from its first stock rights offer. In May, the property developer secured P10 billion from three- and five-year corporate notes.
At end-September, the property developer had 13 residential projects in the market. An upcoming project is Blue Residences at Loyola Heights in Quezon City.
“The market has rewarded SM Development’s sound corporate fundamentals as its market capitalization almost tripled to P65.59 billion as of Nov. 2, compared with P21.71 billion as of end of last year,” Philippine Stock Exchange Chairman Hans B. Sicat said in yesterday’s listing ceremony.
SM Development was incorporated as Ayala Fund, Inc. in 1974 before the SM Group of Companies took majority ownership of the company in 1986.
Shares in SM Development -- whose net income climbed to P2 billion in the nine months ending September from P1.4 billion in the same period last year -- closed P0.43 higher at P9.38 each yesterday. -- Neil Jerome C. Morales