SM Prime Holdings should present fund raising initiatives as it faces 43.8 Billion current debts

SM Prime Holdings, Inc. (SMPH) generates cash from operations of 9.4 Billion Pesos during the first half of 2020 down 67% compared to the cash flow generated from operations of the same period a year ago.  In the first half of 2019 it generated cash from operations of 28.8 Billion Pesos.

Despite the slowdown in the cash flows from operations, SMPH spent 24.3 Billion Pesos for property development in the first half of 2020.  While SMPH was able to borrow money in the first half of 2020 to fund the property development expenditures, the material slowdown in the cash generation from operations left SMPH short of cash to pay loans coming due in the coming few months.

As of June 30, 2020 SMPH had a cash balance of only 20 Billion Pesos as against short-term and current debts coming due of 43.8 Billion Pesos.  The pandemic induced slowdown in cash generation from operation will leave SMPH with not enough cash to address the current debts coming due of 43.8 Billion Pesos.  SMPH in normal times dominates real estate in the country with its portfolio of well visited malls spread throughout the country.  The pandemic shook the seemingly indefatigable finances of SMPH.

SMPH has tapped the bond market already in March 2020 raising 15 Billion Pesos. Since then, nothing has been heard of its effort to secure funds to address the debts and loans coming due in the coming months.  The information gap on how SMPH will be addressing its current debts posed a black hole for investors.  This black hole could make a dent on the confidence of investors towards SMPH.

Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point. Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.

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