Malls
INVESTOR KIT 2019 This presentation is available online through www.smprime.com Disclaimer
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2 Investor Kit 2019 Outline
I. The Company • Company Profile • Key Business Units • Malls • Residences • Offices • Hotels & Convention Centers II. Key Strategies • Key Strategies • Landbank • Capex Program III. Financial Highlights • 1H 2019 Results IV. Sustainability • Four Sustainability Pillars • UN SDGs V. Investment Highlights
3 Company Profile
▶ One of the largest integrated property developers in Southeast Asia by market capitalization Market Capitalization ▶ One of the largest listed real estate US$21.02bn developers on the PSE by market capitalization and net income PSE Stock Symbol SMPH ▶ Consistently cited for excellence
in corporate governance, property Market Capitalization PHP1,071bn development, environmental consciousness, and investor relations programs Outstanding Shares 28,879mn
Last Traded Price Php37.10/share (June 28, 2019)
Average Daily US$9.40mn Turnover (YTD)
4 Investor Kit 2019 Key Business Units
Hotels and Malls Residences Commercial Convention Centers
► SM Supermalls ► SM Development ► Offices and ► Radisson Blu Corp. and Warehouses ► SM Lifestyle, Inc. ► Taal Vista Subsidiaries ► Mall of Asia ► Family ► Pico Sands ► Highlands Prime Inc. Complex Entertainment ► Park Inn Center Inc. ► Costa Del Hamilo ► Seaside City Cebu Inc. Complex ► Conrad Manila
► SMX Convention Centers
5 Investor Kit 2019 Key Achievements
Malls (GFA in sqm) Residences (Units Sales)
CAGR = 5.22% 9.5M 10M 9.3M 24K 9.0M 16.6K 8.2M 22K 8M 7.3M 20K 7.0M 18K CAGR = 23.23% 16K 16.2K 13.5K 6M 8.2M 14K 6.2M 6.5M 7.3M 7.7M 8.0M 12K 10K 9.5K 4M 8K 8.0K 6K 6.0K 2M 4K 2K 0.8M 0.8M 0.9M 1.3M 1.3M 1.3M 0K 0M 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 China Philippines
Offices (GFA in sqm) Hotels (Rooms)
700K 1.8K 642K CAGR = 6.99% 1,522 600K 1.6K 1,510 1,510 CAGR = 27.85% 456K 1.4K 1,229 500K 1,075 1.2K 1,015 400K 383K 318K 1.0K 300K 0.8K 189K 0.6K 200K 147K 0.4K 100K 0.2K 0K 0.0K 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
6 Investor Kit 2019 At a Glance
MALLS RESIDENCES
1H2019 Operating Highlights 1H2019 Operating Highlights
► Total Revenues reached PHP31.07 billion, up by ► Total Revenues increased by 26% 8%from PHP28.71 billion to PHP21.43 billion from PHP17.05 billion ► Operating Income grew by 9% to PHP17.28 billion ► Operating Income went up by 43% to PHP8.10 billion from PHP15.90 billion from PHP5.67 billion ► Total Investment Properties of PHP270.89 billion ► Total Assets amounted to PHP204.65 billion
OFFICES HOTELS AND CONVENTION CENTERS
1H2019 Operating Highlights 1H2019 Operating Highlights
► Total Revenues increased by 31% to PHP2.18 billion ► Total Revenues is flat at PHP2.45 billion from PHP1.66 billion ► Operating Income went down by 9% to PHP525 ► Operating Income went up by 29% to PHP1.82 billion million from PHP579 million from PHP1.41 billion ► Total Investment Properties of PHP11.07 billion ► Total Investment Properties amounted to PHP40.21 billion
7 Investor Kit 2019 Malls (as of 1H2019)
Revenue PHP31.07bn
Operating Income PHP17.28bn
Gross Floor Area 9.7m sqm
Malls 72 in PH & 7 in CH Malls Key Business Units
PHILIPPINES CHINA
72 Malls 7 Malls
8.4M sqm Total GFA 1.3M sqm Total GFA
18,519 Tenants 1,916 Tenants
Average Daily Average Daily 4.2M Pedestrian Count 0.2M Pedestrian Count
330 Cinema Screens 58 Cinema Screens
90,739 Parking Slots 15,534 Parking Slots
SM Prime is the largest mall operator/developer in the Philippines.
9 Investor Kit 2019 Malls Key Business Units
Philippine Population: 101M
Philippine Malls Luzon: ▶ In terms of GFA, Metro Manila 38 Malls malls account for 42%, Luzon is 36%, Visayas is 13% and Mindanao is 8% NCR: 23 Malls ▶ Average mature mall occupancy rate is 95% Visayas: ▶ Overall Same-Mall-Sales-Growth 6 Malls (SMSG) is 7% year-on-year (YoY)
Mindanao: 5 Malls
10 Investor Kit 2019 Malls Key Business Units Mall Coverage in PH
Philippine Population: 101M
Caloocan (North) Existing Sites Luzon: Valenzuela Future Sites 45M People (1 Mall) Quezon City Navotas (5 Malls) Malabon
Caloocan Marikina Untapped Area (1 Mall) (1 Mall) NCR: Manila 13M People (2 Malls) San Juan
Mandaluyong (2 Malls) Pasig (2 Malls)
Makati Pasay Pateros (2 Malls)
Taguig (1 Mall)
Visayas: Parañaque (3 Malls) 19M People Las Piñas (2 Malls)
Muntinlupa Mindanao: (1 Mall) 24M People
▶ SMPH malls covered almost all of the key cities in Metro Manila and adjoining towns and municipalities, accounting for 42% of the company’s total gross floor area in the Philippines. ▶ SMPH mall expansion is geared towards the provinces. The focus is to cover most of Northern Luzon, Visayas and the progressive cities in Mindanao.
11 Investor Kit 2019 Malls Key Business Units
China Malls ▶ Operating in China since 2001 and became part of SM Prime in 2007 SM Xiamen Lifestyle ▶ Contributed 5% of the overall revenues and 5% of consolidated operating income ▶ Operates 7 malls with a total GFA of 1.3m sqm ▶ Scheduled to expand SM Xiamen (120,000 sqm) and to start the SM City Tianjin construction of SM Yangzhou (220,000 sqm)
SM City Suzhou
12 Investor Kit 2019 Malls Key Business Units Malls’ Expansion Program
2018 2019 New Malls New Malls
SM City Legazpi SM City Olongapo Central
Name GFA Name GFA
SM Center Imus 13,000 SM Center Dagupan 23,000
SM City Urdaneta Central 59,000 SM City Olongapo Central 72,000
SM City Telabastagan 55,000 SM City Butuan 48,000
SM City Legazpi 87,000 SM Mindpro (Zamboanga) 36,000
SM Center Ormoc 33,000 SM City Baguio (expansion) +32,000
SM City Fairview (expansion) +116,000
▶ This year, SM Prime’s mall launches will all be in the provinces, and these will add more than 300,000 sqm of GFA. ▶ Available landbank of almost 200 hectares which is good for over the next 5 to 7 years
13 Investor Kit 2019 Malls Key Business Units Latest Project: First IKEA Store in the Philippines
▶ SM Prime is building the first IKEA store in the Philippines, to be launched at the end of 2020. ▶ This project will occupy 157,000 sqm of GFA in the Mall of Asia Complex in Pasay City. ▶ IKEA will occupy 65,000 sqm of the GFA to house a two-level shop area, a large warehouse, an e-commerce facility and an integrated call center - making it the world’s largest IKEA store.
14 Investor Kit 2019 Residences (as of 1H2019)
Revenue PHP21.43bn
Operating Income PHP8.10bn
Reservation Sales PHP41.46bn
Residential Units Launched (since 2003) 134,166 Residences Key Business Units
Primary Homes ▶ A leading residential developer of high- rise buildings (HRBs) mid-rise buildings Lane Residences Pool Area (MRBs) and single-detached house and lots ▶ Accounts to 36% of the consolidated revenues ▶ Reservation sales value of PHP41.46
billion in 1H2019, up by 20% from Park Residences Central Park PHP34.45 billion ▶ Unbooked Revenue amounts to PHP128.0bn ▶ Total landbank: 760 hectares
Red Residences Lobby
16 Investor Kit 2019 Residences Key Business Units
Primary Homes
Projects Overview (as of 1H2019) Ready-for-Occupancy (RFO) 2,233 (Unsold Units) Ongoing Construction (Unsold Units) 16,781 Estimated Inventory Value PHP107.64bn
1H2019 Reservation Sales (value) PHP41.46bn 1H2019 CAPEX PHP12.13bn
Landbank (hectares)
Metro Manila 91
Outside Metro Manila 669
Lush Residences, Makati City
17 Investor Kit 2019 Residences Key Business Units Latest Project: The Estate
The Estate
▶ The Estate is a joint venture between SMDC and Federal Land. ▶ Dubbed as an ultra luxury residential project, The Estate is designed by international architectural firm, Foster + Partners. ▶ This is located along Ayala Avenue in Makati City.
18 Investor Kit 2019 Residences Residential Coverage
Caloocan (North)
Valenzuela Quezon City Navotas (12 Projects) Existing Sites Malabon
Caloocan Marikina Future Sites Manila (1 Project) San Juan
Mandaluyong (2 Projects) Pasig Untapped Area (1 Project) Makati Pasay (8 Projects) Pateros (7 Projects) Taguig (1 Project)
Parañaque (4 Projects)
Las Piñas (1 Project)
Muntinlupa
▶ SMPH fairly covered Metro Manila with high-rise condominium projects with majority of its residential projects located in the cities of Quezon, Pasay, Paranaque and Makati. ▶ As of 1H2019, 37 out of the 47 SMDC projects in the country are located in Metro Manila.
19 Investor Kit 2019 Residences Key Business Units
Leisure Homes ▶ Include 2 large-scale tourism projects – Tagaytay Highlands and Pico de Loro Woodlands Point Community at Tagaytay Highlands ▶ Tagaytay Highlands is an exclusive mountain resort, golf club and residential complex, covering some areas of Cavite, Laguna and Batangas ▶ The 40-hectare Pico de Loro is the Phase 1 of Hamilo Coast project, a premier and sustainable leisure Horizon Terraces Garden Villas destination in Nasugbu, Batangas ▶ Landbank of 521 hectares
Freia at Pico de Loro Cove
20 Investor Kit 2019 Residences Key Business Units Latest Project: Tagaytay Highlands – Horizon Terraces & Vireya
Horizon Terraces Vireya
▶ Horizon Terraces is the first integrated development within Tagaytay Highlands featuring a 3.2-hectare Asian contemporary residences comprised 114 units occupying eight buildings of low-rise Garden Suites and Garden Villas. ▶ Vireya, on the other hand, offers a modern, tropical-themed community located at the heart of Tagaytay Highlands. This developments spread over 20.8 hectares of land and offers exclusive, gated community. This community, which is composed of 301 available lots, is the closest to the Midland Golf Club
21 Investor Kit 2019 Residences Key Business Units Latest Project: Pico de Loro - Freia
Freia
▶ Freia is the latest and most prime beachfront condominium development in Hamilo Coast. ▶ This contemporary tropical architectural development offers 223 units offering a mix of 2-BR units and 3-BR Penthouses.
22 Investor Kit 2019 Offices (as of 1H2019)
Revenue PHP2.18bn
Operating Income PHP1.82bn
Gross Floor Area 0.6M sqm
Office Buildings 11 Offices Key Business Units
Offices ▶ Have 11 office buildings with a combined GFA of more than 642,000 sqm TwoE-comCenter ▶ Three of these 11 offices are located in the Mall of Asia Complex in Pasay City, which provide a combined GFA of 382,000 sqm ▶ Have an available landbank of 73
hectares FiveE-comCenter
ThreeE-comCenter
24 Investor Kit 2019 Offices Key Business Units Latest Projects: NU Tower and FourE-Com Center
NU Tower FourE-Com Center
▶ SM Prime will launch NU Tower this 3Q with 41,000 sqm of GFA. ▶ While the three-tower FourE-Com Center will be launched in 2020 with 192,000 sqm of GFA. ▶ Both are located in Mall of Asia Complex, Pasay City.
25 Investor Kit 2019 Hotels and Convention Centers (as of 1H2019)
Revenue PHP2.45bn
Operating Income PHP0.5bn
Hotels 7
Convention Centers & Trade Halls 7 Hotels & Convention Centers Key Business Units
Hotels and Convention Centers ▶ Operating 7 hotels with over 1,700 rooms; 4 SMX Convention Centers, and 3 Megatrade Halls with more
than 37,000 sqm of leasable space as of Conrad Manila Park Inn by Radisson - Clark June 2019 ▶ Conrad Manila and SMX Manila are both located in Mall of Asia Complex, Pasay City. Radisson Blu Hotel Pico Sands Hotel Park Inn by Radisson - Davao
SMX Convention Center Hotels & Convention Centers Key Business Units Latest Projects: Park Inn by Radisson Iloilo & Park Inn by Radisson North EDSA
Park Inn by Radisson - Iloilo ParkSMX Inn Clark by Radisson – North EDSA
▶ Park Inn by Radisson Iloilo, situated right next to SM City Iloilo in Mandurriao, was just launched last 1H2019 offering 200 rooms. ▶ Park Inn by Radisson North EDSA, which is right next to SM City North EDSA, was launched last July 31, 2019 and offers 239 vibrant rooms.
28 Investor Kit 2019 Key Strategies (as of 1H2019)
Landbank 1,539ha
2019 CAPEX PHP80bn
Net Debt To Equity 40:60 Key Strategies Key Strategies
1 Increase acquisition of large-scale strategic landbank to develop more lifestyle cities
2 Leverage on world-class malls to anchor lifestyle city strategy
3 Ensure excellence in delivering residential projects
4 Continue the rollout of offices, hotels and convention centers as part of Integrated Development
5 Maintain strong balance sheet, prudent risk & capital management and good governance
30 Investor Kit 2019 Key Strategies Landbank
Area by Region (in hectares) Area Metro No. of Sites (in hectares) % of Total Manila Provincial
Malls 38 185 12% 19 166
Primary Homes 94 761 49% 91 669
Leisure Homes 3 521 34% - 521
Commercial 14 73 5% 5 68
Total 149 1,539 100% 115 1,424
▶ SM Prime’s landbank is good for the next 5 to 7 years, located in emerging progressive cities across the country ▶ Leisure projects are for medium-term development
31 Investor Kit 2019 Key Strategies CAPEX Program
PHP54bn PHP59bn PHP44bn PHP58bn PHP91bn PHP80bn 100% 6% 7% 8% 6% 12% 13% 90%
80% 28% 37% 70% 33% 51% 62% 48% 60%
50%
40% 65% 30% 57% 55% 20% 41% 39% 32% 10%
0% 2014A 2015A 2016A 2017A 2018A 2019E Malls Residences Others
▶ SM Prime will spend an average of PHP80bn for 2019 to support our provincial expansion and landbanking ▶ The CAPEX program will be funded by the combination of local borrowings and internal funds
32 Investor Kit 2019 Key Strategies Maintain Conservative Balance Sheet
Debt to Equity* Net debt to Equity** 100% 100%
90% 90% 32% 36% 80% 39% 80% 38% 37% 40% 40% 42% 42% 43% 45% 45% 70% 70%
60% 60%
50% 50%
40% 40% 68% 64% 30% 61% 30% 62% 63% 60% 60% 58% 58% 57% 55% 55% 20% 20%
10% 10%
0% 0% 2014 2015 2016 2017 2018 1H2019 2014 2015 2016 2017 2018 1H2019
Equity Debt Debt to Equity Equity Debt Net Debt
**Total interest-bearing liabilities- cash & cash equivalents *Total interest-bearing liabilities and investment securities Total equity attributable to equity holders of the parent + Total equity attributable to equity holders of the parent + Total interest-bearing liabilities Total interest-bearing liabilities- cash & cash equivalents and investment securities
33 Investor Kit 2019 ₱
Financial Highlights (as of 1H2019)
Consolidated Net Income PHP19.30bn
Consolidated Revenue PHP57.05bn
Consolidated Operating Income
PHP27.43bn Financial Highlights Consolidated Financials Revenue Segment Contribution
100% 5% 6% 7% 9% 8% 7% 90%
80% 34% 32% 32% 33% 35% 38% 70%
60%
50%
40%
30% 61% 62% 61% 58% 57% 55% 20%
10%
0% 2014 2015 2016 2017 2018 1H2019
Malls Residences Other Businesses
▶ Malls accounts for 55% of SM Prime’s consolidated revenues. ▶ Residences accounts for 38%. ▶ Other Businesses cover the rest.
35 Investor Kit 2019 Financial Highlights Consolidated Financials Net Income Segment Contribution
100% 1% 4% 9% 10% 10% 10% 90% 25% 24% 80% 24% 25% 29% 30% 70% 60% 50% 40% 74% 72% 67% 30% 65% 62% 60% 20% 10% 0% 2014 2015 2016 2017 2018 1H2019
Malls Residences Other Businesses
▶ 67% of the consolidated net income is recurring while the 32% comes from developmental income. ▶ Malls contribute the most among key business units, followed by Residences. ▶ The contribution from these Business units should be sustained over the medium term.
36 Investor Kit 2019 Financial Highlights Consolidated Financials
(In PHP Billion) 1H2019 1H2018 % Chg
Revenues 57.05 49.77 15%
EBITDA 32.24 27.71 16%
Operating Income 27.43 23.36 17%
Net Income 19.30 16.62 16%
▶ Recorded a 16% net income growth to PHP19.3bn in 1H2019 from PHP16.6bn, while operating income registered a 17% growth to PHP27.4bn in 1H2019 from PHP23.4bn. Consolidated revenues likewise grew by 15% to PHP57.0bn from PHP49.8bn. ▶ The consistent growth in rental income and higher residential sales drove the overall growth of the company.
37 Investor Kit 2019 Financial Highlights Financials Malls: PH
(In PHP Billion) 1H2019 1H2018 % Chg
Revenues 28.08 25.75 9%
- Rent Income 23.34 21.62 8%
- Cinema and Event Ticket Sales 4.74 4.13 15% and others
EBITDA 19.25 17.55 10%
Operating Income 15.82 14.52 9%
▶ Rental Income went up by 8% in 1H2019 to PHP23.3bn from PHP21.6bn due to the additional rentals from new and expanded malls. ▶ Same-mall-sales growth was sustained at 7% YoY. ▶ Operating income increased by 9% to PHP15.8bn from PHP14.5bn.
38 Investor Kit 2019 Financial Highlights Financials Malls: CH
(In RMB Billion) 1H2019 1H2018 % Chg
Revenues 0.39 0.36 7%
- Rent Income 0.37 0.35 7%
- Others 0.01 0.01 15%
EBITDA 0.30 0.26 13%
Operating Income 0.18 0.17 11%
▶ Revenues went up by 7% to RMB0.39bn in 1H2019 from RMB0.36bn of the previous year. ▶ SM City Xiamen is the major contributor among the seven SM China malls.
39 Investor Kit 2019 Financial Highlights Financials Residences
(In PHP Billion) 1H2019 1H2018 % Chg
Revenues 21.43 17.05 26%
EBITDA 8.17 5.74 42%
Operating Income 8.10 5.67 43%
▶ Revenues grew by 26% to PHP21.4bn in 1H2019 from PHP17.0bn last year due to high demand on high-rise residential projects launched in 2016 to 2018, revenue recognition of recently launched projects and strong demand from overseas Filipinos, middle-income earners and international buyers ▶ Gross profit margin improved to 53% from 50%, whereas net income margin also increased to 28% from 25% of last year. ▶ Reservation sales grew by 20% to PHP41.5bn from PHP34.5bn last year.
40 Investor Kit 2019 Financial Highlights Financials Other Businesses
(In PHP Billion) 1H2019 1H2018 % Chg
Revenues 4.63 4.11 13%
EBITDA 2.93 2.48 18%
Operating Income 2.35 1.99 18%
▶ Revenues from Commercial Properties Group and Hotels and Convention Centers cover 7% of the overall consolidated revenues.
41 Investor Kit 2019 Financial Highlights Consolidated Balance Sheet
(In PHP Million (except % data) 1H2019 % to Assets 2018 % to Assets
Assets Cash and cash equivalents 40,558 6% 38,766 6% Financial assets at fair value through other 24,308 4% 23,532 4% comprehensive income Receivables & Contract Assets 42,784 7% 35,229 6% Investment Properties 322,448 47% 293,575 49% Land and development 81,359 13% 79,331 13% Condominium and residential units for sale 8,063 1% 8,088 1% Other Assets 125,432 22% 125,613 21% Total Assets 644,952 100% 604,134 100% Liabilities and Stockholders’ Equity Interest bearing debt 232,336 36% 222,811 37% Accounts payable and others 124,867 19% 102,245 17% Total Liabilities 357,203 55% 325,056 54% Total Equity 287,749 45% 279,078 46%
▶ Continue to maintain a very conservative balance sheet ▶ Half of our assets are in the investment properties while our interest bearing debt accounts for 36%
42 Investor Kit 2019 Financial Highlights Cash Flow
(In PHP millions) 1H2019 2018 2017 2016 2015 2014
Cash Flows from Operating Activities
Operating Income before Working Capital 32,181 54,149 53,385 37,678 36,362 33,568 Changes
Net Cash provided by operations 28,849 45,964 45,777 31,491 31,938 6,751
Net Cash flows used in Investing Activities (23,076) (64,078) (41,012) (27,080) (55,230) (29,389)
Net Cash Flows provided by (used in) Financing (3,862) 12,633 14,176 (5,604) 14,015 30,750 Activities
Net Increase (Decrease) Cash and Cash 1,792 5,605 19,171 (669) (9,375) 8,104 Equivalents Cash and Cash Equivalents at Beginning 38,766 44,371 25,201 25,870 35,245 27,142 of Year
Cash and Cash Equivalents at End of Year 40,558 38,766 44,372 25,201 25,870 35,245
▶ Net gearing is equivalent to 40:60 in 1H2019, well below the management target of keeping 50:50 net debt to equity ratio ▶ Cash flow mostly come from malls, residential operations and increasing contribution from other businesses.
43 Investor Kit 2019 Hotels & Convention Centers
Sustainability Sustainability Four Sustainability Pillars
SM Prime recognizes the valuable contributions of SM Prime’s property development brings about significant ripple employees to the Company’s success. Hence, the Company effect to the communities where it has situated its businesses. puts great importance to their professional growth and well- Cognizant of this opportunity to serve millions of customers being. The Company invests through developmental daily, the Company ensures that its facilities foster inclusivity programs to improve the employee’s knowledge and skills. and accommodate the needs of its stakeholders. The Company SM Prime institutionalized programs on creates strong relationship not only with health and wellness. Employee its local communities but also with the volunteerism is highly encouraged as it LGUs, NGOs, International Organizations helps develop and strengthen relationships and other interest groups. The internally and with the communities communities are then transformed and served by the Company and its people. grow with SM Prime.
SM Prime acknowledges that it plays a SM Prime as a key player in the Philippine significant role as a catalyst of property development industry is aware economic growth in the Philippine that it needs to build and manage lifestyle economy. The Company’s mission cities sustainably. Thus, various include the enhancement of shareholder innovations and technological value of its investors. Integral in advancements for the protection of maximizing the shareholders’ return natural capital have been adapted by the of investment is SM Prime’s strict Company. It has also entered into adherence to good corporate governance. Further, SM Prime’s partnerships with local and international environmental and businesses create multiplier effect in the communities where it disaster risk resilient organizations as a sign of its serious operates thereby resulting to increase economic activity and commitment to being environmentally responsible and resilient improvement in the lives of its customers and stakeholders. across all aspects of its operations.
45 Investor Kit 2019 Sustainability Supporting the United Nations Sustainable Development Goals*
*Data as of December 31, 2018 46 Investor Kit 2019 Investment Highlights
▶ Establish strong brand equity ▶ Leading integrated real estate platform with strong track record across full suite of asset classes ▶ World-class mall business, which will anchor future sustainable lifestyle city projects ▶ Significant growth opportunities from landbank optimization and future acquisitions 2018 Annual Report ▶ Strong balance sheet supported by strong recurring income ▶ Highly experienced management team and strong corporate governance
2018 Sustainability Report
47 Investor Kit 2019 Financial Highlights
INVESTOR KIT 2019 This presentation is available online through www.smprime.com