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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
By most conventional measures, SM Prime Holdings Inc. (SMPH) has done almost everything right in 2025. Earnings rose to ₱48.8 billion, margins expanded despite flat revenues, leverage remained manageable, and cash flows from malls continued to exhibit enviable stability. Yet the stock price tells a different story.
At around ₱21–22 per share, SMPH trades far below its pre‑pandemic highs and has failed to meaningfully re‑rate despite record earnings. This divergence between operational strength and market valuation raises a deeper question: what exactly does the market want SMPH to be now?
The answer, increasingly, is yield.
A Market That Has Moved On
For years, SMPH was valued as a growth developer—a company perpetually building the next mall, the next integrated estate, the next residential tower. That narrative justified premium multiples. But that era has quietly ended.
Today, revenue growth is modest. Earnings growth is driven not by expansion but by discipline—lower costs, better tenant mix, and operating leverage. Return on equity has stabilized at around 11%. These are not the hallmarks of a growth stock. They are the characteristics of a mature compounder.
The market has responded accordingly. SMPH’s long‑term chart shows a structural de‑rating from growth‑era valuations toward a range that increasingly looks yield‑anchored. The downside is now limited, but the upside rallies are capped. Investors are no longer asking how fast SMPH can grow. They are asking how much cash they can reliably get paid.
The Incomplete Yield Story
And yet, SMPH is not fully priced like a yield stock—because it does not yet behave like one.
Yes, dividends have increased. Yes, buybacks have been introduced. But these remain incremental, not transformational. At current prices, SMPH’s dividend yield hovers around 2–2.5%, respectable but not compelling for income‑focused investors, especially in a higher‑rate environment.
The missing link is structural commitment. Yield stocks—true yield stocks—do three things:
- Capex moderates
- Payout ratios become predictable
- Management messaging shifts from expansion to returns
SMPH has only partially embraced this transition.
Enter the REIT Question
This brings us to the increasingly unavoidable question:
Should SMPH spin off more assets into REITs?
Strategically, the answer is yes—but selectively and deliberately.
SMPH already understands the REIT playbook. The success of AREIT, both as a capital recycling tool and a valuation unlock, is proof that the SM ecosystem can execute this well. REITs monetize stabilized assets, lower balance‑sheet risk, and surface value that conglomerate structures often obscure.
For SMPH, spinning off mature, fully stabilized mall assets into additional REIT vehicles would achieve three things simultaneously:
Unlock Hidden Value
Mall assets sitting on SMPH’s balance sheet are carried at cost less depreciation. In a REIT structure, these assets are valued on yield, not book value. That alone can crystallize billions in embedded equity.Fund Dividends Without Strangling Growth
REIT proceeds allow SMPH to raise dividends without starving development projects of capital. This avoids the false choice between growth and yield.Force a Clearer Identity
A parent company increasingly focused on development, capital allocation, and REIT sponsorship naturally gravitates toward a cash‑return narrative. Markets reward clarity.
But Not All Assets Should Be Spun Off
There is, however, a real risk in over‑financialization.
SMPH’s greatest strength has always been control of its ecosystem—the ability to curate malls, integrate residential and office components, and adapt assets dynamically. Over‑REIT‑ization can reduce flexibility, especially in assets that benefit from active repositioning or redevelopment.
In other words, not every mall should be a REIT mall.
The optimal strategy is a barbell approach:
- Spin off: fully mature, low‑growth, high‑occupancy malls with predictable cash flows
- Retain: flagship, redevelopment‑heavy, or strategically integrated assets where optionality matters
This preserves operational agility while still satisfying the market’s demand for yield visibility.
The Cost of Inaction
The greater risk for SMPH is not spinning off too much, but doing too little, too slowly.
If SMPH continues to straddle the line between developer and yield vehicle, the market may keep it in valuation limbo: too slow for growth investors, too low‑yield for income investors. That is how high‑quality companies end up permanently undervalued.
The stock’s current behavior suggests investors are already applying a yield discount—but without awarding a yield premium. This is the worst of both worlds.
A Strategic Inflection Point
SMPH today is no longer being judged on how many malls it can build. It is being judged on capital efficiency and cash returns. The operational execution is already there. The balance sheet is strong enough. The mall cash flows are proven.
What remains is a strategic choice.
If SMPH leans decisively into capital recycling and REIT monetization—while clearly articulating a medium‑term payout framework—the market is likely to follow with a re‑rating, not back to growth‑era multiples, but toward a stable, yield‑anchored valuation befitting its asset quality.
The question is not whether SMPH can become a yield investment.
It already is—in everything but name and structure.
The next move will determine whether shareholders finally get paid like it.
We’ve been blogging for free. If you enjoy our content, consider supporting us!
Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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