SM Prime in Q3: Mall momentum supports a prolonged resi reset
Third-quarter 2026 net income hit P10.9 billion, down 14% year-on-year and 15% quarter-on-quarter. This takes nine-month 2026 total to P35.4 billion, down 5% year-on-year, which is in line with expectations as it accounts for 73% of the Street's and AB Capital's full-year 2026 earnings estimates. Sustained mall growth cushioned the drag from its residential segment.
Mall revenues rose 12% year-on-year in the third quarter of 2026, supported by 6% same-store growth and stronger complementary income. Tenant sales grew 9% through September, led by dining and experiential concepts, with occupancy at 96%. Third-quarter 2026 residential revenue fell 57% year-on-year to P5.0 billion, largely reflecting cancellations of legacy contracts identified through a stricter account review. Presales fell 10% to P36.8 billion; unsold stock stood at P181.6 billion (3.7 years of inventory life; 14% ready for occupancy).
Pasay 360 is also becoming a more credible net asset value (NAV) catalyst. The reclamation project has advanced after Presidential Decree No. 1479 covered 213.57 hectares, although Philippine Reclamation Authority (PRA) titling and eventual developer conveyance remain outstanding. With land filling complete and ground improvement above 91%, we expect infrastructure financing (i.e., Asian Infrastructure Investment Bank and Asian Development Bank) and project execution to drive future capital requirements.
Maintain OUTPERFORM. We cut our 2026-2027 estimated earnings per share (EPS) by 3% and 1%, reflecting weaker residential revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) following legacy cancellations and subdued take-up. Risk-reward remains attractive given recurring earnings and Pasay 360 monetization upside. Sustained rerating, however, depends on improved ready-for-occupancy cash collections and residential profitability.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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