FS Undone

BALIWAG POLYTECHNIC COLLEGE
College of Accountancy
FINANCIAL STATEMENT ANALYSIS OF

BSA-2B Group 2
A Research Paper Presented to the Faculty of

COLLEGE OF ACCOUNTANCY
Baliwag Polytechnic College
In Partial Fulfillment of the

Requirements for the Degree of
Bachelor of Science in Accountancy
ACT19 – Financial Management
Presented to:
Mr. Jomar V. Villena, CPA
Presented by:
Ailene DC. Mendoza
Francis Camille N. San Pedro
Francis Lloyd V. Galuza
Hazel C. Magno
Marie S. Padilla
Stephanie V. Camaya
APRIL 2020
FINANCIAL STATEMENT ANALYSIS

SM PRIME HOLDINGS Inc. Towards Sustainable Development
APPROVAL SHEET
The financial statement analysis paper for “SM Prime Holdings Inc.”,
prepared and submitted by BSA-2B Group 2 in a partial fulfillment of the
requirements of BSA – ACT19 (Financial Management) has been
examined and is recommended for acceptance for oral
defense/presentation.
MR. JOMAR V. VILLENA, CPA

Adviser
REVIEW PANEL
Approved by the committee on Oral Examination with a grade of ________.
Panelist 1 Panelist 2
Panelist 3
DATE OF FINAL PRESENTATION: April __, 2020
ACKNOWLEDGEMENT

We would like to give our most sincere appreciation and thanksgiving to those
who help us in making this study possible, complete, and excellent.
To our Almighty God, for giving us the opportunity to experience this kind of
challenges that develop our skills and ability.
To our classmates, friends, and families especially to our parents for giving
us unconditional love and support especially in terms of financial and moral.
To our Financial Management Professor Jomar V. Villena, CPA, for sharing us

moral support and unceasing guidance all throughout the making of this paper.
As well as motivating us through his teachings and made us a responsible
student.
This research would not be possible without the people who were
gratuitously sharing their time to help us.
We are grateful for this wonderful accomplishment.
Thank you!
God bless us all.
Table of Contents
Cover Page

Approval Sheet
Acknowledgment
SECTION I: COMPANY BACKGROUND

 Business Background
 Ranking
 Products or Services
SECTION II: Industry Analysis
 Threats Opportunities Weaknesses and Strengths (TOWS
Matrix)
 PESTEL Analysis
SECTION III: HORIZONTAL ANALYSIS AND INTERPRETATION
VERTICAL ANALYSIS (COMMON-SIZE ANALYSIS) AND
INTERPRETATION
SECTION IV: FINANCIAL MIX RATIOS AND INTERPRETATION
a. Profitability
b. Growth
c. Liquidity
d. Leverage
SECTION V: FORECASTING
SECTION V: CONCLUSION and RECOMMENDATION
SECTION VII: APPENDIXES

1. References
2. Audited Financial Statement 2017-2018
3. Curriculum Vitae
SECTION I: COMPANY BACKGROUND
 BUSINESS BACKGROUND

SM Prime Holdings, Inc. (SMPH) is one of the largest integrated

property developers in Southeast Asia that offers innovative and
sustainable lifestyle cities with the development of malls, residences,
offices, hotels and convention centers. It is also the largest, in terms of
asset, in the Philippines.
SM Prime Holdings, Inc. was incorporated in Philippines in 1994. They
started as a mall developer and operator and grew to be the biggest
retail shopping center developer and operator in the Philippines.
Currently, it has 74 malls in and outside Metro Manila and 7 shopping
malls in China, totaling 9.8 million square meters of Gross Floor Area
(GFA), making it one of the biggest mall operators in Southeast Asia. In
the Philippines, they have a total of 18,716 tenants and 1,960 tenants in
China.
SM Prime started its mall development business in 1985 with the
opening of SM North EDSA. However, it was in the early 90’s when the
“malling phenomenon” became apparent with the opening of SM City
Sta. Mesa in 1990 and SM Megamall in 1991. Malling has become a way
of life for millions of Filipinos as more SM Malls were opened in Metro
Manila and provincial areas. The management of the malls is now
handled by subsidiary Shopping Center and Management Corporation
(SCMC). SM Supermalls, SM Prime’s mall development and operations
group, continues to deliver its promise of providing the best in family fun
mall experience, reaching further to more shoppers with the opening of
five new malls in 2018. The group carries on its expansion in the
provinces, adding 300,000 sqm to the mall business unit’s total gross
floor area (GFA).

SM Prime goes beyond mall development and management through

its units and subsidiaries, SM Development Corporation (SMDC) is the
residential business component that sells affordable condominium units.
SM Prime’s commercial business units, the Commercial Property Group
(CPG) is engaged in the development and leasing of office buildings in
Metro Manila. Its Hotels and Convention Corporation (SMHCC) business
unit develops and manages various hotel and convention centers across
the country.
First, SM Development Corporation (SMDC) is a trailblazer in the
middle market residential condominiums which commits itself to
providing access to luxurious urban living through vertical villages
perfectly integrated with a commercial retail environment, giving its
residents access to a truly cosmopolitan lifestyle. With SMDC, Filipinos
can now live in style, comfort, and convenience. It has the makings of
your next dream home with their quality amenities and top-notch
services. Properties of SM Development Corporation are strategically
situated in key areas across Metro Manila specifically the Central
Business Districts of Mall of Asia Complex, Makati, Ortigas, Taguig,
Quezon City, Manila, Pasay, Paranaque and Las Pinas. Having those
locations, they can also be easily accessed from neighboring provinces
like Cavite, Bulacan, and Pampanga. As demands for primary home
remains robust, SMDC aims to launch more projects in various cities in
Metro Manila and develop homes in key cities in Visayas and Mindanao. It
will continue to build more homes that will provide comfort and a
balanced environment for communities.
Next, SM Prime’s Commercial Properties Group (CPG) primarily
handles the development and leasing of office buildings in prime Metro
Manila and strategic regional locations, as well as the operations and

management of such buildings and other land holdings. One of its office
buildings is the E-com Centers which is a series of modern and iconic
office buildings mostly targeting technology-based industries and
business process outsourcing (BPO) companies are found in the Mall of
Asia Complex. Other similar office building developments catering to the
BPO industry include the SM Cyber Buildings that is a mix of build-to-suit
and ready-to-use office spaces in Makati City, and soon in other
emerging “next wave” locations.
Lastly, SM Hotels and Conventions Corporation (SMHCC) operates
convention centers and trade halls through SMX Convention Center
(SMX), which has become a popular venue for both local and
international events. Setting the bar in upscale convention facilities, SMX
provides an ideal venue for large-scale institutional events, townhall
meetings, weddings, exhibits, and concerts in many cities across the
country.
Over the years, SM Prime has become a key partner for most retailers
in the Philippines. Through its malls, SM Prime remains to be a catalyst in
nurturing start-up businesses evident with SM’s aggressive expansion
over the last two decades.
SM Prime’s healthy relationship with its tenants is the key to the
development and growth of most retailers, the small to medium-scale
enterprises (SME) in the country, considered as the backbone of
successful global economic developments. These SMEs are now major
contributors to the overall growth of the Philippines through new
investments and job creations. SM Prime continues to provide
opportunities to start-up retailers that offer innovative concepts and
unique ideas that aim to cater to the evolving needs, and wants of
millions of Filipino shoppers.

As SM Prime remained focused on its growth and development

strategies, prestigious international and local award-giving bodies cited
SM Prime as one of the Philippines’ leading companies in 2013. A true
testament to SM Prime’s commitment to provide the best value returns
to its stakeholders by achieving management excellence in all that they
do.
VISION, MISSION, AND OBJECTIVES
Vision Statement
To build and manage innovative integrated property developments
that are catalysts for a better quality of life.
Mission Statement
We will serve the ever-changing needs and aspirations of our
customers, provide opportunities for the professional growth of our
employees, foster social responsibility in the communities we serve,
enhance shareholder value for our investors and ensure that everything
we do safeguards a healthy environment for future generations.
Code of Ethics
The Code of Ethics states the principles that guide the Company’s
directors, officers and employees in the performance of their duties and
responsibilities, and in their transactions with investors, creditors,
customers, contractors, suppliers, regulators and the general public. It

also underscores the Company’s commitment to promote and protect

the welfare of its employees, customers and the communities where its
businesses operate and emphasizes the need to protect, sustain and
enhance the environmental, social and economic resources needed to
deliver long-term growth.
SM Prime has developed company policies and programs in line with

the principles of Code of Ethics.
 Customer and Community Welfare Programs
 Employee Wellness and Development Programs
 Environment and Sustainability Programs
Through the Policy on Accountability, Integrity and Vigilance (PAIV)
the Company provides an environment where concerns and issues
regarding violation of the Code of Ethics, corporate policies, law or
regulation may be raised freely within the organization.
On an annual basis, the Human Resources Department requires all
employees to take the 3-part Corporate Governance program. This
program gives employees an overview of the Company’s Corporate
Governance Framework, policies, and various components which are also
contained in an internal portal for employees’ easy access and reference.
It also covers the importance of ethics in the business, informs
employees of their rights and obligations, as well as the principles and
best practices in the promotion of good work ethics. This specifically
includes the following:
1. Confirmation – to confirm that employees have read and
understood and agrees to comply with the Company’s Code of
Ethics, Insider Trading Policy, Conflict of Interest Policy, and

Guidelines on Acceptance of Gifts and Travel Sponsored by

Business Partners (Anti-Corruption Policy), among others.
2. Disclosure Survey - to disclose each employees’ affiliations,
interests, relationships, and/or transactions which are relevant for
full disclosure of all actual, apparent or possible conflicts of
interest.
3. E-Learning Courses (self-paced learning) - to be familiarized with
the provisions of the Code of Ethics and other specific policies in
upholding corporate governance in the workplace.
Corporate Governance
Our Board of Directors is at the helm of the company’s governance
structure and is duty-bound to apply high ethical standards, taking into
account the interests of all stakeholders. They provide the tone from the
top with regard to how the company is to conduct its business in a
manner that balances the interests of all stakeholders, i.e., employees,
communities, shareholders, customers, suppliers, business partners,
government regulatory bodies, etc. The Board ensures all shareholders
are treated fairly and equitably, and also recognizes, protects and
facilitates the exercise of their rights.
Success in implementing corporate governance standards is achieved
when corporate governance standards become embedded in the culture
of the organization and in our decision making and business processes.
SM Prime acknowledges that good corporate governance is an integral
part of good management practice and the four core principles of
integrity, fairness, accountability and transparency are embedded in a
practical way into business processes.

The impetus for improving corporate governance standards should go

beyond mere compliance. The purpose and relevance of good corporate
governance practices should be very clear and understood throughout
the organization. To be effective, it should serve as the framework upon
which all the policies and activities of the organization are built upon.
Board Committees
The Board has established five (5) committees to aid in the
performance of its duties. Each committee has adopted a Charter, which
defines its composition, roles and responsibilities based on the provisions
found in the Manual on Corporate Governance.
The Executive Committee
Position Name Directorship
Chairperson Hans T. Sy Non-Executive Director
Member Henry T. Sy, Jr. Non-Executive Director
Member Jeffrey C. Lim Executive Director
Member Herbert T. Sy Non-Executive Director
Member Elizabeth T. Sy Non-Director
Member John Nai Peng C. Ong Non-Director
The Executive Committee functions when the Board of Directors is not

in session. Generally, the Committee is responsible for assisting the
Board in overseeing the implementation of strategies and long-term
goals, reviewing major issues facing the organization, monitoring the
operating activities of each business group, and defining and monitoring
the Company's performance improvement goals.
The Audit Committee

Position Name Directorship Attendance
Chairperson Jose L. Cuisia, Jr. Independent 4/4 meetings
Director

Member Joselito H. Independent 4/4 meetings

Sibayan Director
Member Gregorio U. Independent 4/4 meetings
Kilayko* Director
Member Jorge T. Mendiola Non-Executive 4/4 meetings
Director
The mandate for the Audit Committee includes the review of the
Company’s financial reports and subsequent recommendation to the
Board for approval, as well as the review of SM Prime’s internal control
systems, its audit plans and auditing processes.
The Committee, through the Internal Audit Department, assists the
Company in accomplishing its vision, mission and objectives by bringing
a systematic and disciplined approach to evaluate and improve the
effectiveness of the organization's risk management, control, and
governance processes.
The Corporate Governance Committee

Chairperson Joselito H. Independent 4/4 meetings
Sibayan Director
Member Gregorio U. Independent 4/4 meetings
Kilayko Director
Member Jose L. Cuisia, Jr. Independent 4/4 meetings
Director
The Corporate Governance Committee is tasked to ensure the Board’s

effectiveness and due observance of sound corporate governance
principles and policies. The Committee believes that prudent and

effective corporate governance practices constitute the foundation of the

Company’s strength and long-term existence to enhance and maximize
long-term shareholder value. The Corporate Governance Committee,
through the use of a Board Matrix, also ensures that the Board has an
appropriate mix of directors to fulfill its roles and responsibilities and
respond to the needs of the organization based on the evolving business
environment and strategic direction. Further, the Company referred to
external sources in the last financial year which includes
recommendations of existing management executives, professional
associations and the other recruitment channels.
The Board Risk Oversight Committee

Chairperson Gregorio U. Independent 4/4 meetings
Kilayko Director
Member Jose L. Cuisia, Jr. Independent 4/4 meetings
Director
Member Jorge T. Mendiola Non-Executive 4/4 meetings
Director
The Board Risk Oversight Committee assists and advises the Board of
Directors in fulfilling its oversight responsibilities to ensure that there is
an established effective risk management framework which promotes
performance by linking strategy and business objectives to both risk and
opportunity. The Company’s enterprise risk management framework
focuses on integrating systematic risk management with an
organization’s business strategy and operations and therefore creating
greater value for its stakeholders.

The Related Party Transactions Committee

Chairperson Joselito H. Independent 3/3 meeting
Sibayan Director
Member Gregorio U. Independent 3/3 meeting
Kilayko Director
Member Jorge T. Mendiola Non-Executive 3/3 meeting
Director
The Related Party Transactions Committee is responsible for

reviewing and approving related party transactions in accordance with
the Related Party Transactions Policy. It independently reviews and
endorses all related party transactions such that these transactions are
dealt on terms no less favorable to the company than those generally
available to an unaffiliated third party under the same or similar
circumstances.
ORGANIZATIONAL CHART
BOARD OF DIRECTORS

MR. JEFFREY C. LIM- Director

Mr. Jeffrey C. Lim was appointed President of SM Prime in October
2016 and has been reappointed as such since then. He is a member of
the Company’s Executive Committee. He also serves as President of SM
Development Corporation. He was elected to the Board of Directors of
SM Prime in April 2016. He holds various board and executive positions in
other SMPH’s subsidiaries. He is a Certified Public Accountant and holds a
Bachelor of Science degree in Accounting from the University of the East.
Prior to joining the Company in 1994, he worked for a multi-national
company and for SGV & Co.
MR. HENRY T. SY, JR.- Chairman

Mr. Henry T. Sy, Jr. has been a director of SMPH since 1994. He was
appointed as Chairman of the Board in 2014. He is responsible for the
real estate acquisitions and development activities of the SM Group,
which include the identification, evaluation and negotiation for potential
sites, as well as the input of design ideas. He is currently the Vice
Chairman of SMIC, Chairman and Chief Executive Officer of SMDC,
Chairman of Pico de Loro Beach and Country Club Inc., and Vice

Chairman of The National Grid Corporation of the Philippines. He holds a

Bachelor’s Degree in Management from De La Salle University.
MR. HANS T. SY- Director

Mr. Hans T. Sy is the Chairman of the Executive Committee of SM
Prime and has been a Director of the Company since 1994. He previously
held the position of President of SM Prime until September 2016. He also
held key positions in several companies engaged in banking, real estate
development, mall operations, as well as leisure and entertainment. He is
currently Adviser to the Board of SM Investments Corporation, Chairman
of China Banking Corporation, and Chairman of National University. Mr.
Sy holds a B.S. Mechanical Engineering degree from De La Salle
University.
MR. HERBERT T. SY- Director

Mr. Herbert T. Sy has been a director of the Company since 1994. He
is an Adviser to the Board of SMIC and is currently the Chairman of
Supervalue Inc., Super Shopping Market Inc. and Sanford Marketing
Corporation and Director of Alfamart Trading Philippines Inc. and China
Banking Corporation. He also holds board positions in several companies
within the SM Group. He has worked with the SM Group of Companies for
more than 30 Years, engaged in food retailing. He is actively involved in
the SM Group’s Supermarket Operations, which include acquisition,
evaluation and negotiation for potential sites. He holds a Bachelor’s
degree in Management from De La Salle University.
MR. JORGE T. MENDIOLA- Director

Mr. Jorge T. Mendiola has been a director of SM Prime since 2012. He

is currently a Director of SM Retail, Inc. He started his career with The SM
Store as a Special Assistant to the Senior Branch Manager in 1989 and
rose to become its President in 2011. He is also currently the Vice
Chairman for Advocacy of the Philippine Retailers Association. He
received his Masters in Business Management from the Asian Institute of
Management. He holds an A.B. Economics degree from Ateneo de Manila
University.
MR. JOSE L. CUISIA, JR.- Vice Chairman and Lead Independent

Director
Mr. Jose L. Cuisia, Jr. has served as Vice Chairman and Independent
Director of the Board of Directors of SM Prime since 1994. He was first
appointed Lead Independent Director of the Company in February 2017
and has been reappointed as such the following year. He served as the
Ambassador of the Republic of the Philippines to the United States of
America from April 2, 2011 until June 2016. Mr. Cuisia was also the Vice
Chairman of Philam Life after having served the company as its President
and Chief Executive Officer for 16 years. He was also Chairman of the
Board for BPI-Philam Life Assurance Co., the Philam Foundation and
Tower Club, Inc. Mr. Cuisia was also the Governor of the Bangko Sentral
ng Pilipinas (BSP) and Chairman of its Monetary Board from 1990-1993.
He was also Governor for the Philippines to the International Monetary
Fund and Alternate Governor to the World Bank. Prior to joining the BSP,
he was Administrator and CEO of the Philippine Social Security System
from 1986-1990. Mr. Cuisia is also a Non-Executive Director of Bacnotan
Consolidated Industries (now PHINMA Corporation); Independent Director
of Century Properties Group & Manila Water Company, Inc. (all of which

are publicly listed companies). Likewise, he is also Chairman of the Board

of the Covenant Car Company, Inc., and holds directorates in PHINMA,
Inc. In 2018, he was appointed Chairman of the Board of FWD Insurance
and elected as Chairman of the Ramon Magsaysay Awards Foundation.
Ambassador Cuisia was active in educational institutions, having been
Chairman of the Board of Trustees of the Asian Institute of Management,
a previous Trustee of the University of Asia & the Pacific and Chairman of
De La Salle University Board of Trustees. He was the CV Starr Chairman
of Corporate Governance for the Asian Institute of Management. He is
also a Convenor-Trustee of the Philippine Business for Education (PBEd).
Mr. Cuisia is an alumnus of De La Salle University, where he graduated in
1967 with degrees in Bachelor of Arts in Social Science and Bachelor of
Science in Commerce (magna cum laude), Major in Accountancy. He
finished his Masters in Business Administration-Finance at The Wharton
School, University of Pennsylvania in 1970 as a University Scholar. Mr.
Cuisia is a recipient of numerous awards and accolades including 2017
Signum Meriti for exemplary public service from De La Salle University;
2006 Distinguished La Sallian Award; Ten Outstanding Filipino (TOFIL)
awardee on December 2016 by the JCI Senate and ANZA Foundation; the
Order of the Sikatuna with the rank of Grand Cross by President Benigno
Aquino III in 2016; Lifetime Contributor Award (public sector) by the Asia
CEO Forum in 2015; “Joseph Wharton Award for Lifetime Achievement”
by the prestigious Wharton Club of Washington, DC in May 2011;
Management Association of the Philippines’ Management Man of the Year
for 2007; Manuel L. Quezon Award for Exemplary Governance in 2006;
Raul Locsin CEO of the Year Award in 2004; and Ten Outstanding Young
Men (TOYM) Award for Domestic Banking in 1982.

MR. GREGORIO U. KILAYKO- Independent Director

Mr. Gregorio U. Kilayko has been an Independent Director of SM Prime
since 2008. He is the former Chairman of ABN Amro’s banking operations
in the Philippines. He was the founding head of ING Baring’s
stockbrokerage and investment banking business in the Philippines and a
Philippine Stock Exchange Governor in 1996 and 2000. He was a director
of the Philippine Stock Exchange in 2003. He is currently an Independent
Director in Belle Corporation and Philequity Fund. He took his Masters in
Business Administration at the Wharton School of the University of
Pennsylvania.
MR. JOSELITO H. SIBAYAN- Independent Director

Mr. Joselito H. Sibayan has been an Independent Director of the
Company since 2011. He has spent the past 31 years of his career in
investment banking. From 1987 to 1994, and after taking his Master of
Business Administration from University of California in Los Angeles, he
served as Head of International Fixed Income Sales at Deutsche Bank in
New York and later moved to Natwest Markets to set up its International
Fixed Income and Derivatives Sales/Trading operations. He then moved
to London in 1995 to run Natwest Market’s International Fixed Income
Sales Team. He is currently the President and CEO of Mabuhay Capital
Corporation (MC2), an independent financial advisory firm. Prior to
forming MC2 in 2005, he was Vice Chairman, Investment Banking -
Philippines and Country Manager for Credit Suisse First Boston (CSFB).
He helped establish CSFB’s Manila representative office in 1998, and
later oversaw the transition of the office to branch status.

CORPORATE EXECUTIVES
ORGANIZATIONAL STRUCTURE

 RANKING
Over the years, SM Prime has managed to show financial strength and
steady growth through the development of its world-class malls. Driven
by its vision, passion for innovation, and commitment to serve its

customers, the Company has enabled itself to transform the malls from
mere shopping locations to premier destinations and now as the center
in the development of the Company’s Lifestyle Cities.
SM Prime Holdings, Inc. main sources of revenues primarily include
rental income from mall and food courts, as well as from cinema ticket
sales and amusement income.
The revenue share of malls owned by SM Prime Holdings Inc. in the
Philippines accounted for about 57 percent (%) of the total revenue of
the company in 2018. SM supermalls are a chain of shopping malls
owned and operated by SM Prime Holdings with about 74 malls across
the Philippines.
SM Prime’s wholly-owned residential developer, SM Development

Corporation (SMDC), is one of the leading housing developers in the
Philippines. SMDC commits itself to provide access to luxurious urban
living through vertical villages perfectly integrated with a commercial
retail environment, giving its residents access to a truly cosmopolitan
lifestyle.

SMDC’s growth has been nothing short of remarkable since the launch of
its first residential building in 2006. It has expanded its portfolio to
include properties in most cities in Metro Manila, as well as in
neighboring cities and provinces, including Rizal, Tagaytay, Pampanga,
Laguna, Bulacan, and Cavite. Setting another milestone in 2018, SMDC
embarked on its first residential venture in Mindanao with the launch of
Lane Residences in Davao City. This brings SMDC ever closer to
achieving its vision to create a nation of homeowners.
SMDC continued its upward trajectory in 2018, a banner year with
stellar growth in reservation sales, and strong take up of its high-rise,
mid-rise, and house and lot developments. To meet rising demand from
both end-use and investor markets, SMDC unveiled several new projects
in 2018. These include Hill Residences in Novaliches, Quezon City, Park
Residences within the complex of SM City Sta. Rosa, Laguna, Lush
Residences and Red Residences in Makati, Leaf Residences in Susana
Heights, Muntinlupa, and the previously mentioned Lane Residences
located within the sprawling 10-hectare mixed-use SM Lanang Premier
development in Davao City. With its first development in Mindanao,
SMDC’s promise to bring “The Good Life”, where homeowners get to live
in conveniently located, aspirational, yet affordable residences, reaches
a brand-new audience.

In just about a decade, SM Prime’s Commercial Properties Group

(CPG) has established itself as a preferred office building developer by
many major local and multinational companies looking for office space in
the Philippines. Its world-class office buildings, particularly the E-Com
Centers, have significantly contributed to the business activity in the Mall
of Asia Complex and has helped propel the Bay Area in Pasay City as the
fastest growing commercial business district in the country as cited in a
report by Colliers International. Resulting from this success, the Mall of
Asia Complex was recognized as the best Mixed-Use Development for
Investment Opportunity in 2018.
2018 has been a banner year for the group as it launched its first
certified LEED Gold building—the Three E-Com Center, which achieved
100% occupancy. Its office tenants include industry giants such as
Amazon, Alorica, ICTSI, and Microsourcing as its office tenants. For its
retail offering, its tenants include Starbucks Reserve, Tim Hortons, BDO,
and Alfamart. Similarly, the rest of the E-Com Centers are also fully
leased-out.
As the country continues to rank as one of the best outsourcing
destination together with the sustained economic growth, expect that SM
Prime’s Commercial Properties Group to continue leading and
transforming its properties into meaningful commercial spaces for
everyone.

SM Hotels and Conventions Corporation (SMHCC) was established to

address the vast potential of tourism in the country. It is now developing
and operating hotels and convention centers all throughout the
archipelago with a current portfolio of 1,722 rooms housed in the 261-
room Taal Vista Hotel, a heritage hotel located in Tagaytay City; the 400-
room upper upscale Radisson Blu Hotel in Cebu; the 154-room Pico
Sands Hotel in Hamilo Coast; the 204-room Park Inn by Radisson in
Davao; the 155-room Park Inn by Radisson in Clark in Pampanga; the
348-guestroom deluxe 5-star hotel, Conrad Manila, located in the Mall of
Asia Complex, and in the recently launched 200-room Park Inn by
Radisson in Iloilo and 239-room Park Inn by Radisson in North EDSA,
Quezon City.
All these allow guests to experience luxury and the world-renowned
Filipino hospitality, made more memorable by the natural beauty of their
surrounding landscapes.
SMHCC operates convention centers and trade halls through SMX
Convention Center (SMX), which has become a popular venue for both
local and international events. Setting the bar in upscale convention
facilities, SMX provides an ideal venue for large-scale institutional events,
townhall meetings, weddings, exhibits, and concerts in many cities
across the country.
Consequently, SMX has branch out to Taguig, Davao, Bacolod and
soon in Clark, Pampanga. SMHCC also operates trade halls in SM
Megamall and SM City Cebu. Put together, SM Prime Convention Centers
and tradehalls has a total of 37,480 square meters of gross leasable area

(GLA) making it the largest privately run exhibition and conventions

business in the Philippines.
Philratings noted that SMPH’s earnings remained robust, with net

income attributable to equity holders of the parent recorded at 32.2
billion in 2018, and representing a year-on-year increase of 16.7 percent.
Consolidated revenues amounted to 104.1 billion for the same period.
The growth was attributed to additional rental revenues from new and
expanded malls, and higher contribution from residential sales.

 PRODUCTS AND SERVICES
A. MALLS
SM Supermalls, SM Prime’s mall development and operations group,
continues to deliver its promise of providing the best in family fun mall
experience.
Malls Listing (Philippines)

METRO LUZON VISAYAS MINDANAO CHINA
MANILA
Sta. Mesa Bacoor Cebu Davao Xiamen
Megamall Pampanga Iloilo Cagayan de Jinjiang
Oro
Southmall Lucena Bacolod General Chengdu
Santos
Fairview Baguio Consolacion Lanang Suzhou
Premier
Manila Marilao Seaside CDO Chongqing
Cebu Downtown
Premier
Sucat Dasmariñas Ormoc Zibo
Bicutan Batangas Tianjin
San Lazaro Molino
Valenzuela Sta. Rosa
Mall of Asia Clark
Pasig Lipa

Muntinlupa Taytay
Marikina Rosales
Las Piñas Baliwag
Novaliches Naga
Aura Premier Rosario
BF Parañaque Tarlac
Sangandaan San Pablo
Cherry Shaw Calamba
Cherry Masinag
Congressional
East Ortigas Olongapo
S Maison San
Fernando
North EDSA Cauayan
Angono
Megacenter
Cabanatuan
San Mateo
Cabanatuan
San Jose Del
Monte
Trece
Martires
Cherry
Antipolo
Puerto
Princesa
Tuguegarao
Downtown
Pulilan
Lemery
Imus
Urdaneta
Central
Telabastaga
n

Legazpi
B. RESIDENCES
The establishment of SM Development Corporation (SMDC) in 2006
aimed to provide Filipinos with a luxurious urban living environment that
is seamlessly integrated with commercial and leisure shops. These have
been transformed into self-sustaining vertical villages that have their
own shopping mall, cinemas, leisure and relaxation facilities, and other
amenities.
SM Development Corporation
Metro Manila Luzon Mindanao
Chateau Elysee Wind Lane
Mezza Cool
Berkeley Cheer
Grass Cheerful
Sea Green 2
Field Hope
Princeton Charm
Sun Park
Jazz
Light
Blue
M Place at South
Triangle
Shine
Green
Shell
Breeze
Grace
Shore
South
Trees
Air
Fame
Coast

Spring
S
Vine
Bloom
Red
Leaf
Hill
Lush
Highlands Prime, Inc. Costa Del Hamilo, Inc.

Pueblo Real Carola
Woodlands Point (Phase 1 and 2) Jacana
Hillside Miranda
Horizon Myna
Vireya Freia
Woodridge Place (Linden Building)
Aspenhills
Woodridge Place (Mahogany
Building)
Sierra Lago
Horizon Terraces Condo 1
Horizon Terraces Townhouse 2
Horizon Terraces Condo 2
Horizon Townhouse 1
C. OFFICES
SM Prime’s Commercial Properties Group (CPG) has established itself
as a preferred office building developer by many major local and
multinational companies looking for office space in the Philippines.
• E-Com Centers
✓ Three E-Com Center
- First certified LEED Gold building
- Its office tenants include industry giants such as Amazon, Alorica,
ICTSI, and Microsourcing as its office tenants. For its retail offering, its

tenants include Starbucks Reserve, Tim Hortons, BDO, and Alfamart.

Similarly, the rest of the E-Com Centers are also fully leased-out.
✓ Four E-Com Center
-Largest office building in the Mall of Asia Complex.
-Second USGBC pre-certified LEED Gold Building.
Offices
Metro Manila Luzon
Makati Cyber One SM Taytay BPO Tower
Makati Cyber Two SM The Core Tower 1
Two E-Com Center SM Clark BPO Tech Hub
SM Cyber West
Aura Office Tower
Five E-Com Center
Three E-Com Center
SM South Tower
D. HOTELS AND CONVENTION CENTERS

Aside from malls and residences, SM Prime has grown into an
integrated property company with diversified interests in commercial, as
well as several world-class hotels, concert arenas, convention and
exhibition centers and resorts.
Hotels
Metro Manila Luzon Visayas Mindanao
Conrad Manila Taal Vista Radisson Blu Park Inn by
Cebu Radisson Davao
Pico Sands
Park Inn by

Radisson Clark
Convention Centers
Metro Manila Visayas Mindanao
Megatrade Hall Cebu Trade Hall SMX Convention Center
Davao
SMX Convention Center SMX Convention Center
Manila Bacolod
SMX Convention Center Sky Hall Seaside Cebu
Aura
SECTION II: Industry Analysis

 Threats Opportunities Weaknesses and Strengths (TOWS Matrix)
A. STRENGTHS-WEAKNESSES-OPPORTUNITIES-THREATS (SWOT)
MATRIX
The following are the strategies formulated from the SWOT analysis:
Strength-S Weaknesses-W
S1. The biggest developer, W1. Not present in many
operator and owner of world-class countries.
malls – 74 in country and 7 in W2. Lack of online shipping and
china. e-commerce.
S2. Key partner for most retailers W3. Public opinions about SM’s
in the Philippines. poor facilities that leads to death
S3. SM Prime’s Commercial of a customer.
SWOT Properties Group (CPG) continuous
to be the major contributor in office
MATRIX development, office leasing, and
property management in the
country.
S4. A builder of about a hundred
malls and shopping centers all over
the Philippines.
S5. Subsidiaries are SM
Development Corporation; Costa
del Hamilo, Inc., Highlands Prime
Inc., Tagaytay Resort Development
Corporation; SM Arena Complex
Corporation; Sm Hotels and
Conventions Corp., and SM Land
(China) Limited.
Opportunity-O SO Strategies WO Strategies
O1. SM Prime received an 1. Provide a strong and 1. Sustain the increasing
accreditation from the Philippines healthy relationship with development of the
Economic Zone Authority (PEZA). its retailer for the business through
O2. From primary catering to BPO development and growth Information Technology
tenants, the group now caters to of each other. and
different businesses such as 2. Offer more innovative Telecommunications.
Financial Services, Information concepts and unique 2. Develop an online
Technology, Telecommunications, ideas that aim the platform that caters
Logistics and Tourism Industries evolving needs and wants online shopping for the
among others. of million Filipino increasing globalization.
O3. Growth of SM Prime, shoppers. 3. Increase company’s
consistently delivering double- 3. Develop a strong transparency that
digits results in both revenues and relationship with facilitates the welfare of
net income. multinational companies. every customer’s well-
04. Supporting the United Nation’s 4. Develop a growing being.
Sustainable Development Goals number of competitive
(UN SDG’s) office property offering,
offices, hotels,
conventions centers and
residential businesses
from here and abroad.

Threats-T ST Strategies WT Strategies

T1. The emergence of 1. Develop and 1. Build a site on the
the now influential operates an world’s most
millennial market. innovative and powerful e-
T2. SM Prime disrupted unique mall that commerce
by natural disaster and fosters today platform.
infectious diseases or trends. 2. Increase market
fears such as the 2. Build medical research for a
impact of Coronavirus facilities for an better expansion
(COVID 19) in Metro uncertain event in different
Manila and other parts for the health and countries.
of the Philippines. well-being of the 3. Create digital
people. technology
platform that are
essential for
today’s
generation.
4. Focus on
overcoming than
running for all the
possibilities.
B. THREATS-OPPORTUNITIES-WEAKNESSES-STRENGTH (TOWS
MATRIX)
External External Internal Internal

Threats Opportunities Weaknesses Strength
T1. The emergence O1. SM Prime W1. Not present in S1. The biggest
of the now influential received an many countries. developer, operator
millennial market. accreditation from the and owner of world-
Philippines Economic class malls – 74 in
Zone Authority the Philippines and 7
(PEZA). in China.
T2. SM Prime O2. From primary W2. Lack of online S2. Key partner for
disrupted by natural catering to BPO shipping and e- most retailers in the
disaster and tenants, the group commerce. Philippines.
infectious diseases now caters to

or fears such as the different businesses

impact of such as Financial
Coronavirus (NCOV- Services, Information
19) in Metro Manila Technology,
and other parts of Telecommunications,
the Philippines. Logistics and Tourism
Industries among
others.
O3. Growth of SM W3. Public opinions S3. SM Prime’s

Prime, consistently about SM North Commercial
delivering double- Edsa’s poor facilities Properties Group
digits results in both that leads to death (CPG) continues to
revenues and net of a customer. be the major
income. contributor in office
development, office
leasing, and property
management in the
country.
O4. Supporting the S4. A builder of
United Nation’s about a hundred
Sustainable malls and shopping
Development Goals centers all over the
(UN SDG’s). Philippines.
S5. Subsidiaries are

SM Development
Corporation; Costa
del Hamilo, Inc.,
Highlands Prime Inc.,
Tagaytay Resort
Development
Corporation; SM
Arena Complex
Corporation; Sm
Hotels and
Conventions Corp.,
and SM Land (China)
Limited.

 PESTEL Analysis
SM Prime Holdings, being the figure one promenade operator in the

Philippines, on regular basis reviews its external environment. In their
position, understanding the environment they belong is critical to the
planning map of direction for it influences the company’s success rate.
They identify and analyze the cardinal tendencies, forces, and
phenomena holding a possible impact on the preparation and execution
of their schemes. In consequence, the environmental appraisal efforts to
fix the organization to acclimatize to environmental alterations to take
advantage of chances and to minimize the inauspicious effects of
menaces.
a. Analysis of Political Environment

The political environment refers to the political factors and legal
systems that restrict and influence the business, and the political
environment of its operational state which includes the country’s
political systems, rights institutions, promulgated guidelines and
policies, political groups, and political situation. The Philippines is a
democratic country with an elective legislative assembly, and a
multiparty system. Filipinos exercised their right to vote every

three old ages. The import for the concern sector as the following
state’s leader may impact the operations of their organizations.
This can act upon them due to the reforms of the new public
functionaries would take. For SMPH, the consequences of the
approaching election would greatly affect them because it may
impact the stableness of the state and may sabotage their
assurance in its enlargement programs. The reforms of the
Philippine leaders especially with the upcoming elections may
affect the stability of the country and can likewise affect the
expansion plans of SM Prime Holdings.
b. Analysis of Economic Environment

The economic environment refers to the socio-economic
conditions that constitute the survival and development of
enterprises and the country’s economic policies, including such
factors as economic system, economic structure, degree of
urbanization, and consumption structure. The state’s economic
system is assorted economic system wherein most of the
companies are owned in private, nevertheless, authorities can
command when the demand for it arises. The Philippine economic
system is consumer driven and the gross revenues at the state’s
biggest promenades have been a gage of tendencies in consumer
disbursement. The Philippine Gross Domestic Product (GDP) is
driven by consumers spending which greatly contributes to volume
of sales of SM Prime Holdings. Almost 70% of the state’s gross
domestic product (GDP) is contributed by consumer disbursement.
Furthermore the 30% of this entire consumer disbursement
happens inside promenades, and two-thirds of this piece of the pie

is accounted to SM entirely. But harmonizing to the Fitch Ratings

Inc., the state’s GDP is predicated to be at its lowest at 2.5%, which
is lower than the 1998 Asiatic Crisis. Given this prognosis, this can
foretell how SMPH would execute this twelvemonth. This economic
downswing will most likely affect the company and would be
seeable in its fiscal statements.
c. Social, Cultural and Demographic Analysis

Changes in society, culture, and population have a major impact
on all products, services, markets, and consumers. Enterprises in
all industries, large or small, profitable or non-profitable, face the
opportunities and challenges brought about by changes in society,
culture, and population. One social-cultural factor that affects
organizations is the consumer purchasing behavior.
Consumers are the beginning of net income of the company and
that is why they are researching in great item to learn the
purchasing behavior of their consumers in order to track consumer
tendencies and respond to it. Understanding the buying patterns
replies what a consumers’ bargain, where they buy, how much
they buy, when they buy and why they buy. Filipino buyers are
becoming “smart buyer” who focused on foods and necessities. SM
Prime Holdings may not be directly affected by this buying
behavior but this may affect its tenant like in the case of its malls.
In a recent study conducted by the Planetary Market Research
House Synovate, it revealed that 92% of occupants in Metro
Manila, which is comprised of all societal brackets and where
promenades are concentrated, have cut their disbursement, while
61% did less unprompted purchasing. Moreover, 55% said they’ve

focused on nutrient and other necessities and spent less on

diversion every bit good as luxury points. In short, Filipinos are still
passing but they are passing for the cheaper and basic things.
Although SMPH may not be straight affected by this purchaser
behavior, this may impact its renters’ entire gross revenues. Since
renters’ lease fees are determined through a per centum of their
income or through a fixed monthly rent footing, SMPH’s entire
gross may squash.
d. Analysis of Technology
The uninterrupted betterment of engineering has dramatically
changed every organization’s procedure; for illustration new selling
channels were introduced like the cyberspace. More than 50% of
the Philippine population is internet users; it is nevertheless
forecasted to grow yearly. If this tendency continues, it will
revolutionize the manner Filipinos live. A good illustration of this is
e-commerce, wherein markets, which were one time
unapproachable because of distance and costs, are now
unfastened through internet.
It can be seen that science and technology plays an extremely
good role in industrial growth. E-malls (e.g. Lazada and Shoppee)
are rapidly penetrating the consumer market. With this strength,
shopping behavior of the consumers tend to shift which can have
an adverse effect on the performance of SM Prime Holdings.
Although e-commerce is still an unfamiliar district here in the state
wherein merely 3% in National Urban Philippines made on-line
purchase, it has a strong promise particularly in the coming old
ages due to the increasing handiness of the cyberspace, greater

personal computer incursion and passage by the authorities of

suitably strong e-commerce statute law. With this deduction, SMPH
may happen a new rival by agencies of the alleged e-malls. This
can be a serious menace for the company since this brings many
advantages to consumers such as convenience, hardiness,
interactivity and immediate response.
e. Analysis of Environment
SM Prime Holdings should always secure an Environment
Compliance Certificate or ECC for their expansion plan because if
they fail to do so, all their expansion plans will be on trouble.
f. Legal Analysis
There are so many laws related to business and employment
that affects it. SM Prime Holdings has had so many tussles with
laws over labor-related issues. Legal scenario is quite complex and
SM Prime Holdings have to be cautious since any violation can
result in big fines.
The current legal system of the Philippines is based on the 1987
Constitution but there can be an on-going trend that is directed to
revise the existing system. According to several lawmakers, the
business enterprise sector would be the number one beneficiary of
the constitutional change as the proposed amendments include
creation of a more efficient and competitive business environment
amongst others. SMPH is highly subjected to this change. If this
would motivate through, all commercial regulations may be
modified which would affect the way the SMPH manages – taxes

may go up, new labor codes may be enacted, ownership take

action may be amended.
SM PRIME HOLDINGS Inc., AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Amounts in Thousands)
DECEMBER
2018 2017 HORIZONTAL ANALYSIS VERTICAL ANALYSIS
ASSETS
Peso Change % Change 2018 2017
Current Assets
Cash and cash equivalents ₱ 38,766,467 ₱ 44,371,534 (5,605,067) -12.63% 6.42% 8.24%
Financial assets at FV through OCI 0 731,076 (731,076) 0.00% 0.00% 0.14%
Receivables and contract assets 35,229,450 33,990,678 1,238,772 3.64% 5.83% 6.31%
Condominium and residential units for sale 8,088,139 8,733,299 (645,160) -7.39% 1.34% 1.62%
Land and development 29,486,964 22,518,138 6,968,826 30.95% 4.88% 4.18%
Equity instruments at FV through OCI 639,316 641,300 (1,984) -0.31% 0.11% 0.12%
Derivative assets 432,898 0 432,898 0.00% 0.07% 0.00%
Prepaid expenses and other current assets 15,147,029 14,590,015 557,014 3.82% 2.51% 2.71%
Total Current Assets 127,790,263 125,576,040 2,214,223 1.76% 21.15% 23.32%
Noncurrent Assets
Investments in associates and joint ventures 26,199,380 24,566,239 1,633,141 6.65% 4.34% 4.56%
Equity instruments at FV through OCI 22,892,937 30,464,845 (7,571,908) -24.85% 3.79% 5.66%
Property and equipment - net 1,419,111 1,493,427 (74,316) -4.98% 0.23% 0.28%
Investment properties - net 293,574,616 273,084,146 20,490,470 7.50% 48.59% 50.72%
Land and development - net of current portion 49,844,246 36,148,036 13,696,210 37.89% 8.25% 6.71%
Derivative assets - net of current portion 420,035 3,546,694 (3,126,659) -88.16% 0.07% 0.66%
Deferred tax assets - net 1,083,670 1,114,291 (30,621) -2.75% 0.18% 0.21%
Other noncurrent assets 80,910,060 42,423,880 38,486,180 90.72% 13.39% 7.88%
Total Noncurrent Assets 476,344,055 412,841,558 63,502,497 15.38% 78.85% 76.68%
₱ 604,134,318 ₱ 538,417,598 65,716,720 12.21% 100.00% 100.00%
LIABILITIES AND EQUITY

Current Liabilities
Loans payable ₱ 39,400 ₱ 744,400 (705,000) -94.71% 0.01% 0.14%
Accounts payable and other current liabilities 61,767,086 51,084,082 10,683,004 20.91% 10.22% 9.49%
Current portion of long-term debt 25,089,624 25,344,035 (254,411) -1.00% 4.15% 4.71%
SECTION III: Horizontal and Vertical Analysis and Interpretation (SFP)
Income tax payable
Total Current Liabilities
1,383,742
88,279,852
1,035,215
78,207,732
348,527
10,072,120
33.67%
12.88%
0.23%
14.61%
0.19%
14.53%
Noncurrent Liabilities
Long-term debt - net of current portion 197,682,262 167,509,484 30,172,778 18.01% 32.72% 31.11%
Tenants' and customers' deposits - net of current portion 18,676,022 16,376,024 2,299,998 14.04% 3.09% 3.04%
Liability for purchased land - net of current portion 6,044,220 2,170,998 3,873,222 178.41% 1.00% 0.40%
Deferred tax liabilities - net 3,527,501 2,877,971 649,530 22.57% 0.58% 0.53%
Derivative liabilities 335,008 777,408 (442,400) -56.91% 0.06% 0.14%
Other noncurrent liabilities 10,511,491 7,624,067 2,887,424 37.87% 1.74% 1.42%
Total Noncurrent Liabilities 236,776,504 197,335,952 39,440,552 19.99% 39.19% 36.65%
Total Liabilities ₱ 325,056,356 ₱ 275,543,684 49,512,672 17.97% 53.81% 51.18%
Equity Attributable to Equity Holders of the Parent
Capital stock ₱ 33,166,300 ₱ 33,166,300 - 0.00% 5.49% 6.16%
Additional paid-in capital - net 39,953,218 39,662,168 291,050 0.73% 6.61% 7.37%
Cumulative translation adjustment 1,955,999 2,110,745 (154,746) -7.33% 0.32% 0.39%
Net FV changes of equity instruments at FV through OCI 19,084,597 25,489,705 (6,405,108) -25.13% 3.16% 4.73%
Net fair value changes on cash flow hedges (842,098) (311,429) (530,669) 170.40% -0.14% -0.06%
Remeasurement loss on defined benefit obligation (348,480) (199,126) (149,354) 75.00% -0.06% -0.04%
Retained earnings:
Appropriated 42,200,000 42,200,000 0 0.00% 6.99% 7.84%
FINANCIAL STATEMENT A
Unappropriated N A L Y S120,125,945
143,118,153 IS 22,992,208 19.14% 23.69% 22.31%
SM PRIME HOLDINGS Inc. Towards
Treasury stock Sustainable
(2,984,695) (3,287,087) Development
302,392 -9.20% -0.49% -0.61%
Total Equity Attributable to Equity Holders of the Parent 275,302,994 258,957,221 16,345,773 6.31% 45.57% 48.10%
Non-controlling Interets 3,774,968 3,916,693 (141,725) -3.62% 0.62% 0.73%
Total Equity 279,077,962 262,873,914 16,204,048 6.16% 46.19% 48.82%
₱ 604,134,318 ₱ 538,417,598 65,716,720 12.21% 100.00% 100.00%
SM Prime Holdings Inc., AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME STATEMENT
(Amounts in Thousands)
FOR THE YEAR ENDED
DECEMBER 31 HORIZONTAL ANALYSIS VERTICAL ANALYSIS
2018 2017
Peso Change % Change 2018 2017
REVENUE
SECTION
Rent III: Horizontal and ₱Vertical
57,162,796 ₱ Analysis
51,406,294 and Interpretation
5,756,502 11.20% 54.92% (IS)
56.54%
Sales:
Real estate 35,872,552 29,434,050 6,438,502 21.87% 34.47% 32.37%
Cinema and event ticket 5,218,434 4,767,364 451,070 9.46% 5.01% 5.24%
Others 5,826,783 5,314,142 512,641 9.65% 5.60% 5.84%
104,080,565 90,921,850 13,158,715 14.47% 100.00% 100.00%
COSTS AND EXPENSES (55,753,334) (50,293,058) (5,460,276) 10.86% -53.57% -55.31%
INCOME FROM OPERATIONS 48,327,231 40,628,792 7,698,439 18.95% 46.43% 44.69%

OTHER INCOME (CHARGES)
Interest expense (7,540,045) (5,474,422) (2,065,623) 37.73% -7.24% -6.02%
Interest and dividend income 1,828,776 1,214,347 614,429 50.60% 1.76% 1.34%
Others - net (649,787) (420,856) (228,931) 54.40% -0.62% -0.46%
(6,361,056) (4,680,931) (1,680,125) 35.89% -6.11% -5.15%
INCOME BEFORE INCOME TAX 41,966,175 35,947,861 6,018,314 16.74% 40.32% 39.54%
PROVISION FOR INCOME TAX
Current (8,534,428) (7,531,782) (1,002,646) 13.31% -8.20% -8.28%
Deferred (520,618) (291,616) (229,002) 78.53% -0.50% -0.32%
(9,055,046) (7,823,398) (1,231,648) 15.74% -8.70% -8.60%
FNETI N A N C I A L S T A T E M E N T₱ 32,911,129
INCOME A N A L₱ Y SIS
28,124,463 4,786,666 17.02% 31.62% 30.93%

Attributable to:
Equity holders of the Parent (Notes 20 and 30) 32,172,886 27,573,866 4,599,020 16.68% 30.91% 30.33%
Non-controlling interests (Notes 20) 738,243 550,597 187,646 34.08% 0.71% 0.61%
₱ 32,911,129 ₱ 28,124,463 4,786,666 17.02% 31.62% 30.93%
 INTERPRETATION
SM Prime’s total assets amounted to ₱604.13 billion as of December 31,

2018, an increase of 12.21% from ₱538.42 billion as of December 31, 2017.
Total assets will always equal total liabilities plus total equity. Thus, if a
company's assets increase from one period to the next, you know for sure that the
company's liabilities and equity increased by the same amount. Financially healthy
companies generally have a manageable amount of debt (liabilities and equity). If the
debt level has been falling over time, that's a good sign. In the case of SMPH, its
liabilities increased to 17.97% and its equity increased to just only 6.16% as of
December 31, 2018 from December 31, 2017. At first glance, it may look unfavorable

but we must consider the reason behind the increase of its liabilities. Further, its assets
consist of 53.81% of liabilities and 46.19% of equity as of December 31, 2018.
a. Cash and cash equivalents

Cash and cash equivalents decreased by 12.63% from ₱44.37 billion
to ₱38.77 billion as of December 31, 2017 and December 31, 2018,
respectively based on horizontal analysis, mainly due to payments for
capital expenditure projects during the period, net of increase in the
company’s cash flows from operations and proceeds from long-term
debt. While in vertical analysis it shows that 6.42% of the Total Assets of
SMPH came from it. Although it is not higher as compare in 2017, it is still
good that 6.42% of its Total Assets can be used for daily operations.
This account consists of ₱3.89 billion of cash on hand and in banks
and ₱34.88 billion of temporary investments as of December 31, 2018.
Cash in banks earn interest at the respective bank deposit rates.
Temporary investments are made for varying periods of up to three
months depending on the immediate cash requirements of the Company,
and earn interest at the respective temporary investment rates. Further,
interest income earned from cash in banks and temporary investments
amounted to ₱1,297 million for the year ended December 31, 2018.
b. Financial assets through other comprehensive income

This account consisted of investments in government and corporate
bonds and listed common shares. Financial assets through other
comprehensive income were sold during the period that is why it is 0%
as of December 31, 2018 based on horizontal and vertical analysis.
Interest income earned amounted to nil but dividend income earned
amounted to ₱18 million for the year ended December 31, 2018. It is

good because its proceeds can be used for daily operations or invest to
achieve a profit or material result by putting it into other financial schemes, shares,
or property, or by using it to develop a commercial venture. The main purpose of
this financial instrument is to finance the company’s operations.
c. Receivables and contract assets

Receivables and contract assets increased by 4% from ₱33.99 billion
to ₱35.23 billion as of December 31, 2017 and December 31, 2018,
respectively based on horizontal analysis, due to increase in rental
receivables from new malls and expansions and increase in sales of
residential projects. It is good in the company because receivables are
generally due within twelve months and the risk of loss is minimal as
compare to long-term ones. It is a good implication that the investment
they had made in new malls and expansion projects are making profits.
While in vertical analysis it shows that 5.83% of the Total Assets of SMPH
came from it.
This account consists of trade such as from tenants and sale of real
estate, nontrade, accrued interest, due from related parties, and other
receivables. Trade receivables from tenants are noninterest-bearing and
are normally collectible on a 30 to 90 days’ term. Trade receivables from
sale of real estate pertains to sold condominium and residential units at
various terms of payment, which are also noninterest-bearing. Moreover,
accrued interest and other receivables are normally collected throughout
the financial period. Interest income earned from receivables totaled ₱75
million for the year ended December 31, 2018.
d. Condominium and residential units for sale

Condominium and residential units for sale decreased by 7% from

₱8.73 billion to ₱8.09 billion as of December 31, 2017 and December 31,
2018, respectively based on horizontal analysis, due to faster sales take
up of RFO (Ready for Occupation) units, particularly those projects
located in the bay area. While in vertical analysis it shows that 1.34% of
the Total Assets of SMPH came from it. It is obvious that the company is
making profits and consumers sees the good quality in its condominium
and residential units for sale.
This account consists of ₱7.94 billion of condominium units for sale
and ₱0.15 billion of residential units and subdivision lots.
e. Land and development (Current and Noncurrent Portion)

Land and development (current and noncurrent portion) increased by
₱58.67 billion to ₱79.33 billion as of December 31, 2017 and December
31, 2018, respectively based on horizontal analysis, due to landbanking
and construction accomplishments for the period, net cost of sold units
and transfers of RFO units to condominium and residential units for sale.

It is good that the company is continue expanding its territories and

business operations. ₱29.49 billion of this is accounted for as real estate
inventories and ₱49.84 billion is accounted for as investment property.
While in vertical analysis it shows that 13.13% of the Total Assets of
SMPH came from it.
f. Equity instruments through other comprehensive income

(Current and Noncurrent Portion)
Equity instruments through other comprehensive income (current and
noncurrent portion) decreased by 24% from ₱31.11 billion to ₱23.53
billion as of December 31, 2017 and December 31, 2018, respectively
based on horizontal analysis, due to disposals and changes in fair values
under this portfolio. Dividend income from investments at FVOCI
amounted to ₱394 million. While in vertical analysis it shows that 3.90%
of the Total Assets of SMPH came from it.
This account consists of investments in listed and unlisted shares of
stock which pertain to investments in publicly-listed companies and to
stocks of private corporation, respectively. Just like financial assets
through other comprehensive income, its disposal is good because its
proceeds can be used for daily operations or invest to achieve a profit or
material result by putting it into other financial schemes, shares, or property, or by
using it to develop a commercial venture. The main purpose of this financial
instrument is to finance the company’s operations.
g. Derivative assets (Current and Noncurrent Portion)

Derivative assets (current and noncurrent portion) decreased by 76%
from ₱3.55 billion to ₱0.85 billion as of December 31, 2017 and
December 31, 2018, respectively based on horizontal analysis, mainly

resulting from the maturity of the $350 million cross currency swap
transaction. While in vertical analysis it shows that 0.14% of the Total
Assets of SMPH came from it.
The company enters into derivative transactions, principally, cross
currency swaps, interest rate swaps, foreign currency call options, non-
deliverable forwards and foreign currency range options. The purpose is
to manage the interest rate and foreign currency risk arising from the
company’s operations and its sources of finance.
h. Investments in associates and joint ventures

Investments in associates and joint ventures increased by 7% from
₱24.57 billion to ₱26.20 billion as od December 31, 2017 and 2018,
respectively based on horizontal analysis, due to increase in equity in net
earnings of associates and joint ventures. While in vertical analysis it
shows that 4.34% of the Total Assets of SMPH came from it. It is a good
indication that SMPH can easily pay its short-term debt through these
investments.
Investments in associates pertains mainly to investments in the
following companies:
o OCLP Holdings, Inc. (OHI)
o Feihua Real Estate (Chongqing) Company Ltd. (FHREC)
On May 7, 2015, SMPH acquired 39.96% collective ownership interest
in OHI, through acquisition of 100% interest in six (6) holding entities, for
a total consideration of ₱15,433 million, which approximates the
proportionate share of SMPH in the fair values of the identifiable net
assets of OHI. OHI owns strategic residential, commercial and landbank
areas in key cities in Metro Manila. As of December 31, 2018, the
carrying value of investment in OHI amounted to ₱16,920 million, which

consists of its proportionate share in the net assets of OHI amounting to

₱1,661 million and fair value adjustments and others totaling ₱15,259
million while as of December 31, 2017, the carrying value of investment
in OHI amounted to ₱16,193 million, which consists of its proportionate
share in the net assets of OHI amounting to ₱1,661 million and fair value
adjustments and others totaling ₱14,532 million. The share in profit of
OHI amounted to ₱727 million for the year ended December 31, 2018.
On April 10, 2012, SMPH, through Tennant Range Corporation (TRC),
entered into a Memorandum of Agreement with Trendlink Holdings
Limited (THL), a third party, wherein Fei Hua Real Estate Company
(FHREC), a company incorporated in China and 100% subsidiary of TRC,
issued new shares to THL equivalent to 50% equity interest. In addition,
THL undertakes to pay for the difference between cash invested and the
50% equity of FHREC and the difference between the current market
value and cost of the investment properties of FHREC. Management
assessed that FHREC is an associate of SMPH by virtue of the agreement
with the shareholders of THL. The share in profit amounted to ₱61 million
for the year December 31, 2018.
Investments in joint ventures. On January 7, 2013, SMPH entered into
shareholders agreement and share purchase agreement for the
acquisition of 51% ownership interest in the following companies
(collectively, Waltermart):
o Winsome Development Corporation
o Willin Sales, Inc.
o Willimson, Inc.
o Waltermart Ventures, Inc.
o WM Development, Inc

On July 12, 2013, the deeds of absolute sale were executed between
SMPH and shareholders of Waltermart. Waltermart is involved in
shopping mall operations and currently owns 28 malls across Metro
Manila and Luzon. The investment in Waltermart is accounted as joint
venture using equity method of accounting because the contractual
arrangement between the parties establishes joint control. The share in
profit amounted to ₱326 million for the year ended December 31, 2018.
i. Investment properties
Investment properties increased by 8% from ₱273.08 billion to
₱293.57 billion as of December 31, 2017 and December 31, 2018,
respectively based on horizontal analysis, primarily due to ongoing
commercial building construction, including the four E-Com Center and
the ongoing redevelopment of SM Mall of Asia and other existing malls.
Also, the increase is attributable to landbanking and construction costs
incurred for ongoing projects. While in vertical analysis it shows that
48.59% of the Total Assets of SMPH came from it. It is good that the
company continue to expand, add new facilities, and enhance its existing
properties not just to show that they own a lot but to improve its service
quality through a safe and very today ambiance.
The construction in progress includes shopping mall complex under
construction and landbanking and commercial building constructions
amounting to ₱38,740 million as at December 31, 2018. Interest
capitalized to the construction of investment properties amounted to
₱2,681 million for the year ended December 31, 2018. Capitalization
rates used from 2.35% to 5.04% for the year ended December 31, 2018.
j. Other noncurrent assets

Other noncurrent assets, which includes the noncurrent portion of

receivables from sale of real estate, increased by 91% from ₱42.42
billion to ₱80.91 billion as of December 31, 2017 and December 31,
2018, respectively based on horizontal analysis, due to additional bonds
and deposits for real estate acquisitions and construction
accomplishments of sold units as well as new sales for the period. While
in vertical analysis it shows that 13.39% of the Total Assets of SMPH
came from it. It is good in the company for in the long run, they can
count on that these assets would be available also for the operations of
the business in the future.
This account also consists of bonds and deposits, land use rights, and
time deposits. Bonds and deposits consist of deposits to contractors and
suppliers to be applied throughout construction and advances, deposits
paid for leased properties to be applied at the last term of the lease and
advance payments for land acquisitions which will be applied against the
purchase price of the properties upon fulfilment by both parties of certain
undertakings and conditions. Included under land use rights are certain
parcels of real estate properties planned for residential development in
accordance with the cooperative contracts entered into by SMPH with
Grand China International Limited (Grand China) and Oriental Land
Development Limited (Oriental Land) in March 2007. Portions of land use
rights with carrying amount of ₱319 million as at December 31, 2018 are
mortgaged as collaterals to secure the domestic borrowings in China.
Lastly, time deposits with various maturities within one year were used
as collateral for use of credit line obtained by the company from related
party banks and interest income earned amounted to ₱42 million for the
year ended December 31, 2018.

SECTION VII: APPENDIXES
1. References
A. Thesis/Research Paper
Comparative Analysis of Globe Telecom Inc. and Philippine Long-

Distance Telecommunication Company (PLDT INC.) – prepared by Mr.
Jomar V. Villena
Corporate Planning: A Proposed Strategic Plan for Security Bank

Corporation – prepared by Mr. Jomar V. Villena
B. Internet Sources
https://www.smprime.com
https://www.wsj.com
https://www.lamudi.com.ph
https://www.inquirer.net
https://asia.nikkei.com/Companies/SM-Prime-Holdings-Inc
https://www.theofficialboard.com
https://www.google.com/search?
q=increase+in+asset+of+a+company&rlz=1C1CHBF_enPH853PH853&oq=increase+in
+asset+of+a+company&aqs=chrome..69i57.8004j0j7&sourceid=chrome&ie=UTF-8
https://www.manilatimes.net/2016/03/01/business/sm-prime-sees-e-commerce-more-as-
a-challenge-than-a-threat/247860/amp/
https://edge.pse.com.ph/companyInformation/form.do?cmpy_id=112

2. Audited Financial Statement 2017-2018






3. Curriculum Vitae
AILENE DC. MENDOZA

1257 Tarcan, Baliwag, Bulacan
Contact No: 09107878000
Email Address: aileencruz854@gmail.com
CAREER OBJECTIVES:
“To share my knowledge and skill wherein I can properly use my full
potential to help the company grow and achieve its overall goals.”
ELIGIBILITY:
 Bookkeeping NCIII
 Visual Graphic Designing NCIII
EDUCATIONAL ATTAINMENT:
Tertiary Baliwag Polytechnic College | Bulacan

(2018-present) Bachelor of Science in Accountancy
Next Generation Technological College | Pulilan,
Bulacan
Office Management Technology
2017
Secondary Next Generation Technological College
Alternative Learning System
Pulilan, Bulacan
2016

SKILLS:
 Basic Accounting Skills

 Good Communication Skills
 Computer Literate
 Efficient in Microsoft (Word, Excel & PowerPoint)
 Basic Photoshop and Corel Draw
 Basic AutoCAD (2D and 3D)
TRAINING ATTENDED:
 Visual Graphic Designing | Next Generation Technological College | 2017

 Bookkeeping | Next Generation Technological College | 2016
 Front Office Services Immersion | Lawiswis Kawayan Garden Resort and
Spa | 2015
CHARACTER REFERENCES:
Available upon request
Ailene DC. Mendoza

Researcher

FRANCIS CAMILLE N. SAN PEDRO

831 Kabilang Bacood Sta. Rita Guiguinto Bulacan
Contact No: 09566244879
Email Address: camillesanpedro19@gmail.com
CAREER OBJECTIVES:
“To be part of a reputed organization that will enhance my skills and

knowledge and will provide working experience, opportunity for professional
development and career growth.”
WORKING EXPERIENCE:
 Cashier | Jollibee Food Corporation | June 2019 – present

 Sales Clerk | 7/11 Corporation | April 2018 – May 2019

Secondary La Consolacion University Philippines

Accountancy and Business Management
Malolos, Bulacan

(2018)
Jaime J. Vistan High School
Plaridel, Bulacan
2016
SKILLS:
 Marketing Skills
 Communication Skills
SEMINARS ATTENDED:
 Career Symposium Seminar | La Consolacion University Philippines |

March 2017
Francis Camille N. San Pedro

Researcher

FRANCIS LLOYD V. GALUZA

#147 Mabini St. Poblacion, Pulilan, Bulacan
Contact No: 09364497274
Email Address: francisgaluza826@gmail.com
CAREER OBJECTIVES:
“I am currently looking for a fulltime position in an environment that

offers a greater challenge, increased benefits for my family, and the
opportunity to help the company advance efficiently and productively.”
WORKING EXPERIENCE:
 Work Immersion | Fast Versatile Equipped Security Agency | December 5

– 17, 2017

Secondary Holy Angels Colleges of Pulilan Inc.

Pulilan, Bulacan
(2018)
Holy Angels Colleges of Pulilan Inc.
Pulilan, Bulacan
2016

SKILLS:
 Has the ability to work under pressure
SEMINARS ATTENDED:
 Corporate Social Responsibility in Entrepreneur’s Approach | Holy Angels

Colleges of Pulilan, Inc. | March 3, 2018
Robin Victoria
Statistician
09957818189
Jed Pantaleon
Hotel Receptionist
09975487981
Francis Lloyd V. Galuza

Researcher

HAZEL C. MAGNO
079 Dr. Luis Reyes St. Calantipay, Baliwag, Bulacan
Contact No: 09551622903
Email Address: magnohazel10@gmail.com
CAREER OBJECTIVES:
“To use and enhance my abilities, skills and knowledge that I had been
acquired from school and experiences and to help the stability of Philippine
Economy.”

Secondary STI College

Baliwag, Bulacan
(2018)
Mariano Ponce National High School
Plaridel, Bulacan
2016
SKILLS:

 Highly motivated
 Multi-tasking
 Knowledgeable in Basic Accounting
Hazel C. Magno
Researcher

ROSEMARIE S. PADILLA
115 Galas Maasim, San Rafael, Bulacan
Contact No: 09066051625
Email Address: mariepadddsss@gmail.com
CAREER OBJECTIVES:
“Reliable and detail-oriented employee looking to apply record keeping

and accounting skills in a banking environment.”

Secondary Carlos F. Gonzales High School

Maguinao, San Rafael, Bulacan
(2018)
Carlos F. Gonzales High School
2016

SKILLS:
 Accounting Skills
 Computer Skills
 Leadership Skills
SEMINARS ATTENDED:
 General Assembly for Junior Philippine Institute of Accountants | Baliwag

Star Arena | August 2019
 3-week Career Orientation | Carlos F. Gonzales High School | June 2016
 5-days YES-O Club Orientation | Carlos F. Gonzales High School |
February 2014
Albert O. Almine, CPA

Socorro Accounting and Insurance Services
Tax Associate
09067490131
Ralph Angelo A. Hipolito

Simbulan Group of Companies
Auditor
09364268537
Rosemarie S. Padilla
Researcher

STEPHANIE V. CAMAYA
2040 Zone 3 Calasag, San Ildefonso, Bulacan
Contact No: 09757096460
Email Address: stephanieverocamaya@gmail.com
CAREER OBJECTIVES:
“To work in a company with a professional work driven environment

where I can utilize and apply my knowledge and skills.”
WORKING EXPERIENCE:
 Lace Cutter | AAIN Garments | June – July 2019

Secondary Carlos F. Gonzales High School

(2018)

Carlos F. Gonzales High School

2016
SKILLS:
 Accounting Skills
 Computer Skills
SEMINARS ATTENDED:
 General Assembly for Junior Philippine Institute of Accountants | Baliwag

Star Arena | August 2019
 3-week Career Orientation | Carlos F. Gonzales High School | June 2016
 5-days YES-O Club Orientation | Carlos F. Gonzales High School |
February 2014
Albert O. Almine, CPA

Socorro Accounting and Insurance Services
Tax Associate
09067490131
Ralph Angelo A. Hipolito

Simbulan Group of Companies
Auditor
09364268537
Stephanie V. Camaya
Researcher


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BALIWAG POLYTECHNIC COLLEGE

FINANCIAL STATEMENT ANALYSIS OF

A Research Paper Presented to the Faculty of

In Partial Fulfillment of the

FINANCIAL STATEMENT ANALYSIS

MR. JOMAR V. VILLENA, CPA

Approved by the committee on Oral Examination with a grade of ________.

DATE OF FINAL PRESENTATION: April __, 2020

FINANCIAL STATEMENT ANALYSIS

To our Financial Management Professor Jomar V. Villena, CPA, for sharing us

We are grateful for this wonderful accomplishment.

God bless us all.

FINANCIAL STATEMENT ANALYSIS

SECTION I: COMPANY BACKGROUND

SECTION VII: APPENDIXES

FINANCIAL STATEMENT ANALYSIS

SM Prime Holdings, Inc. (SMPH) is one of the largest integrated

FINANCIAL STATEMENT ANALYSIS

SM Prime goes beyond mall development and management through

FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS

As SM Prime remained focused on its growth and development

VISION, MISSION, AND OBJECTIVES

FINANCIAL STATEMENT ANALYSIS

also underscores the Company’s commitment to promote and protect

SM Prime has developed company policies and programs in line with

FINANCIAL STATEMENT ANALYSIS

Guidelines on Acceptance of Gifts and Travel Sponsored by

FINANCIAL STATEMENT ANALYSIS

The impetus for improving corporate governance standards should go

The Executive Committee functions when the Board of Directors is not

The Audit Committee

FINANCIAL STATEMENT ANALYSIS

Member Joselito H. Independent 4/4 meetings

The Corporate Governance Committee

The Corporate Governance Committee is tasked to ensure the Board’s

FINANCIAL STATEMENT ANALYSIS

effective corporate governance practices constitute the foundation of the

The Board Risk Oversight Committee

FINANCIAL STATEMENT ANALYSIS

The Related Party Transactions Committee

The Related Party Transactions Committee is responsible for

FINANCIAL STATEMENT ANALYSIS

MR. JEFFREY C. LIM- Director

MR. HENRY T. SY, JR.- Chairman

FINANCIAL STATEMENT ANALYSIS

Chairman of The National Grid Corporation of the Philippines. He holds a

MR. HANS T. SY- Director

MR. HERBERT T. SY- Director

MR. JORGE T. MENDIOLA- Director

FINANCIAL STATEMENT ANALYSIS

Mr. Jorge T. Mendiola has been a director of SM Prime since 2012. He

MR. JOSE L. CUISIA, JR.- Vice Chairman and Lead Independent

FINANCIAL STATEMENT ANALYSIS

are publicly listed companies). Likewise, he is also Chairman of the Board

FINANCIAL STATEMENT ANALYSIS

MR. GREGORIO U. KILAYKO- Independent Director

MR. JOSELITO H. SIBAYAN- Independent Director

FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS

SM Prime’s wholly-owned residential developer, SM Development

FINANCIAL STATEMENT ANALYSIS

FINANCIAL STATEMENT ANALYSIS