Bloomberg News

Billionaire Sy’s SM Rises on Property Merger Plan: Manila Mover

February 20, 2013

SM Investments Corp., Philippine billionaire Henry Sy’s holding company, climbed to a record after it said it may merge its property units, which could unseat Ayala Land Inc. as the nation’s largest developer.

SM Investments is studying a proposal to merge units including SM Prime Holdings Inc., Vice Chairman Teresita Sy- Coson said in a mobile-phone message response to queries. The plan isn’t “finalized yet in terms of what companies will be included,” she said.

Combining Sy’s property units will give the 88-year-old tycoon a builder that’s ahead of Ayala Land in sales and market value, according to data compiled by Bloomberg. A bigger property unit will help Sy compete with Ayala Land, a developer with investments from offices, malls to apartments.

“This move is a tacit admission that Ayala Land’s strategy as diversified developer is better than SM’s approach of fragmented units focusing on specific real estate segments,” James Lago, head of research at PCCI Securities Corp. in Manila.

Shares of SM Prime rose 5 percent to 20.25 pesos at the noon trading break in Manila, heading for a record close. SM Investments climbed 0.8 percent to 1,008 pesos, also set for its highest close. Highlands Prime Inc. surged 37 percent while SM Development Corp. jumped 11 percent.

Control Clash

Ayala Land and Sy’s group clashed for control over a property company owned by the Ortigas family in the Philippines. The two groups also fought over the development of a 7.7-hectare (19-acre) state-owned property in Bacolod City in 2011.

“A diversified SM property builder will give Ayala Land a stronger competitor,” Lago said. “Sy will have a developer with stable earnings -- it will get a steady income stream from the malls’ rental earnings and income from the development and sale of property, which is subject to market cycles.”

Sy’s other publicly-listed property ventures also include Belle Corp., and he also owns privately held SM Land Inc., which developed offices for call centers, the 67-hectare Mall of Asia complex in Manila and a 5,800-hectare tourism resort project in Batangas, a province south of Manila.

Sy’s listed property companies are worth a total 501.9 billion pesos ($12 billion), leapfrogging Ayala Land’s 442.13 billion peso market value, according to data compiled by Bloomberg.

SM Prime, the nation’s largest shopping mall operator, and residential builder SM Development had 52.33 billion pesos in combined sales in 2012, compared with Ayala Land’s 49.9 billion revenue. SM Prime had 10.53 billion peso in profit last year compared with Ayala Land’s 9.04 billion peso net income.

The Philippine Daily Inquirer and Philippine Star first reported the plans to merger the property units.

To contact the reporter on this story: Ian Sayson in Manila at isayson@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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