SM Prime: revenue almost flat, but EBITDA margin hits 54.7% — a bet on malls and offices

25 мая 2026 года SM Prime Holdings раскрыла результаты за первый квартал 2026 года. Выручка выросла всего на 0,9% год к году, до 33 747,8 млн песо, EBITDA — на 1,7%, до 18 447,7 млн песо, а чистая прибыль осталась практически на уровне прошлого года (11 867,1 млн песо). При этом рентабельность по EBITDA достигла 54,7% против 54,3% годом ранее, что отражает устойчивость арендного бизнеса. Акции выглядят привлекательно: при P/E LTM 10,5 и дивидендной доходности 2,3% они торгуются с дисконтом к собственным историческим мультипликаторам, а модель портала оценивает потенциал роста в +16%.

Key takeaways

— Q1 2026 revenue grew only 0.9% — hit by slower residential sales

— EBITDA margin reached 54.7% thanks to a 7.9% rise in rental income

— Net profit almost unchanged: operating profit growth offset by tax and interest expenses

— Leverage remains high: net debt at end-March — PHP 395.1bn, Net Debt/EBITDA LTM — 5.1

— Capex in Q1 2026 fell to PHP 12.9bn, supporting operating cash flow

— Trailing dividend yield — 2.3%, below the key rate, but payouts are stable

— Portal's model implies +16% upside to current price

Attractiveness

Key figures, PHP bn

Q1 2026 revenue grew only 0.9% — hit by slower residential sales

In Q1 2026, SM Prime's revenue reached PHP 33,747.8 million, up only 0.9% year-on-year. The main driver was the rental business: rental income rose 7.9% to PHP 21,610.5 million, while real estate sales fell 15.8% to PHP 7,756.5 million. Other revenues (mainly from hotels and convention centers) added 10.6%.

The slowdown in residential sales is the key drag: in Q1 2025 they were PHP 9,216.6 million, and now they have shrunk by almost one and a half billion. This reflects the broader trend in the Philippine property market, where demand for new projects remains sluggish. Nevertheless, the rental portfolio continues to grow, partially offsetting the weakness in the development segment.

EBITDA margin reached 54.7% thanks to a 7.9% rise in rental income

EBITDA for Q1 2026 reached PHP 18,447.7 million, up 1.7% year-on-year. EBITDA margin rose from 54.3% to 54.7% — the highest level in recent quarters. The margin improvement is due to faster growth in rental income, which carries high operating margins, and restrained growth in operating expenses.

Operating profit rose 0.9% to PHP 14,380.0 million, in line with revenue dynamics. However, EBITDA is growing faster because depreciation increased only 8% (to PHP 4,067.6 million), not proportionally to revenue. This suggests the company is managing costs efficiently and benefiting from scale.

Net profit almost unchanged: operating profit growth offset by tax and interest expenses

Net profit for Q1 2026 was PHP 11,867.1 million — exactly the same as a year earlier (PHP 11,864.5 million). Operating profit rose 0.9%, but this growth was fully offset by higher tax and interest expenses. Interest expenses fell 4.3% to PHP 3,279.7 million, while tax charges remained at PHP 2,512.9 million.

Net margin edged down from 35.5% to 35.2%. This is because other income (including share of associates) grew, but could not offset the pressure from operating costs. Overall, the company maintains high efficiency, but profit growth potential is constrained by the current cost structure.

Leverage remains high: net debt at end-March — PHP 395.1bn, Net Debt/EBITDA LTM — 5.1

At end-March 2026, SM Prime's net debt stood at PHP 395,109.1 million. It declined by PHP 11.3 billion during the quarter, but increased by PHP 28.6 billion over the last 12 months. Net Debt/EBITDA LTM is at 5.1 — a high level for a developer, especially amid rising interest rates.

The high debt level is explained by an active investment program: capex in 2025 was significant, and in Q1 2026 it reached PHP 12,920.4 million. Nevertheless, operating cash flow remains strong: over the last 12 months it reached PHP 74,900.0 million, allowing the company to service debt and finance ongoing projects.

Capex in Q1 2026 fell to PHP 12.9bn, supporting operating cash flow

Operating cash flow for Q1 2026 was PHP 19,872.3 million, up 11.9% year-on-year. Capex fell 19% to PHP 12,920.4 million from PHP 15,956.7 million a year earlier. This allowed the company to generate positive free cash flow, which amounted to about PHP 6.95 billion for the quarter.

The capex reduction is linked to the completion of several large projects and a revision of the investment program amid uncertainty in the property market. The company is directing funds to redevelop existing malls and build new properties, but is doing so more cautiously. This is a positive signal for shareholders as it reduces the need for additional debt.

Trailing dividend yield — 2.3%, below the key rate, but payouts are stable

Over the last 12 months, SM Prime paid dividends of 2.3% of the current share price. This is below the key rate, making the stock less attractive for income-oriented investors. Nevertheless, the company maintains a stable dividend policy: payments are made regularly and have not been cut over the past year.

Our dividend forecast for the current year is based on LTM net profit of PHP 49,061.5 million and a historical payout ratio of about 30%. At the current market cap of PHP 516,100.3 million, this implies a yield of about 2.8%, higher than the actual trailing figure. However, the final dividend will depend on the board's decision and funding needs for the investment program.

Portal's model implies +16% upside to current price

Our value-creation model shows that SM Prime's share has an upside potential of +16% to the current price. This is based on multiplying expected EBITDA growth by a target multiple and comparing it with market capitalization. The portal's model accounts for the resilience of the rental business and the potential recovery in property sales.

At current multiples — P/E LTM 10.5 and EV/EBITDA LTM 11.8 — the stock trades below its historical averages. ROE is 10.0%, which is below the cost of equity but reflects a conservative capital structure. If the company continues to generate stable cash flow and reduce debt, the stock has every chance of a re-rating.

Valuation on the latest reported figures

Bottom line

The Q1 2026 report shows the resilience of SM Prime's rental business: EBITDA margin reached 54.7%, and operating cash flow grew 11.9%. However, revenue is almost flat due to weak residential sales, and net profit remained at last year's level. Leverage remains high, but the company is cutting capex and generating positive free cash flow. At current multiples and with +16% upside per the portal's model, the stock looks attractive for long-term investors, but the key factor will be the recovery of the property market and debt reduction.