• First Metro maintained its buy rating on SM Prime despite trimming its target price to P24
• Malls generated 72 percent of pre-tax income in 2025, leading the brokerage to argue the stock is trading near the value of its malls business alone.
• First Metro sees significant upside from the Pasay 360 reclamation project, which it believes is approaching its value-unlocking stage as completion nears.
Investors may be overlooking a large part of SM Prime’s value, according to First Metro Securities, which says the stock is trading near the value of its malls business despite billions of pesos in other assets and future developments.
The brokerage maintained its “buy” rating on the property giant, arguing that concerns over residential sales, office demand and leverage have obscured the value of some of the company’s most important long-term assets.
FMS trimmed its target price to P24 from P28 while maintaining its positive view on the stock.
The June 9 report for institutional investors was prepared by FMS research head Mark Angeles and research analyst Shane Tan.
SM Prime, the property arm of the Sy family, owns the country’s largest mall network and has interests in residential developments, offices, hotels, convention centers and large-scale mixed-use estates.
SM Prime shares last closed at P17.60 each.
Malls carry the business
According to FMS, investors continue to focus on slowing residential sales and weak office demand even though malls have become the overwhelming driver of the group’s earnings.
The brokerage noted that malls accounted for 60 percent of revenue and 72 percent of pre-tax income in 2025, while residential contributed just 30 percent of revenue and 19 percent of pre-tax income.
Mall revenues have grown at a 15.3 percent annual rate since 2022, nearly three times faster than Philippine economic growth over the same period, FMS said.
Based on its valuation, the brokerage estimates the malls business alone supports much of SM Prime’s current share price, leaving limited recognition for the company’s other assets.
Hidden value
FMS said the market appears to place limited value on several businesses beyond malls, including residential projects, hotels, land holdings and the massive Pasay 360 reclamation project.
The brokerage currently values Pasay 360 at cost, equivalent to about P6.14 per share, but estimates that figure could rise to more than P21 per share if the project eventually commands land values comparable to Ortigas.
Located beside the Mall of Asia complex, the 360-hectare development is expected to be completed by 2028 and is viewed by FMS as a key driver of SM Prime’s next phase of growth.
FMS said investors may be overlooking the project’s potential as it approaches what the brokerage described as its value-unlocking stage.
Elevated but manageable debt
FMS also argued that concerns over the company’s debt levels may be overstated.
While SM Prime carried P390.7 billion in net debt as of the first quarter, the brokerage said the balance sheet remains manageable given the recurring cash flows generated by its malls business.
Interest coverage stood at 5.5 times in 2025 and 5.1 times in the first quarter of 2026, levels FMS described as healthy for a company continuing to invest in long-term growth projects.
The report also noted that the recent postponement of a P18 billion bond offering suggests management faces no immediate pressure to raise capital and can be selective about when it taps financial markets.
—Edited by Miguel R. Camus
